**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 WASHINGTON,
        D.C. 20549
  **FORM
        10-Q**
  **x QUARTERLY
        REPORT
        UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT**
 **OF
        1934**
  For
        the
        quarterly period ended: August 31, 2008
  OR
  **o
        TRANSITION REPORT UNDER
        SECTION 13 OR 15(D) OF THE EXCHANGE ACT OF 1934**
  For
        the
        transition period from ________________ to ________________
  *Commission
        File No. 0-26057*
  **BIOPHAN
        TECHNOLOGIES, INC.**
 (Exact
        name of registrant as specified in its charter)
 
 Nevada
              82-0507874(State or other jurisdiction of
              (I.R.S. Employer Identification No.)incorporation or organization)
 
 15
        Schoen
        Place
 Pittsford,
        New York 14534
 (Address
        of principal executive offices) (Zip Code)
  (585)
        267-4800
 (Registrant's
        telephone number, including area code)
  Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding 12 months (or for such shorter period that the registrant was required
        to file such reports), and (2) has been subject to such filing requirements
        for
        the past 90 days.
  YesxNo
o
  Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer or a non-accelerated filer. See definition of "accelerated
        filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
        one).
  **Large
        Accelerated Filer**o**Accelerated
        Filer**o**Non-Accelerated
        Filer**o**Smaller Reporting
        Company**x
  Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).
  Yes
oNo
x
  Indicate
        the number of shares outstanding of each of the issuer's classes of common
        equity, as of the latest practicable date.
  Class
        outstanding as of October 10, 2008 - Common Stock, $.005 par value: 243,285,264
        shares
  
  **INDEX**
 
 **PART
                  I. FINANCIAL INFORMATION**ITEM
                  1. Financial StatementsCondensed
                  Consolidated Balance Sheets, August 31, 2008 (Unaudited) and February
                  29,
                  2008
              
              1Condensed
                  Consolidated Statements of Operations, Three Months and Six Months
                  Ended
                  August 31, 2008 and 2007 (Unaudited), and from August 1, 1968 (Date
                  of
                  Inception) through August 31, 2008 (Unaudited)
              
              2Condensed
                  Consolidated Statements of Cash Flows, Six Months Ended August
                  31, 2008
                  and 2007 (Unaudited), and from August 1, 1968 (Date of Inception)
                  through
                  August 31, 2008 (Unaudited)
              
              3Notes
                  to Condensed Consolidated Financial Statements
              
              6ITEM
                  2. Management's Discussion and Analysis of Financial Condition
                  and Results
                  of Operations
              
              16ITEM
                  3. Quantitative and Qualitative Disclosures About Market
                  Risk
              
              20ITEM
                  4. Controls and Procedures
              
              20PART
                  II. OTHER INFORMATIONITEM
                  1. Legal Proceedings
              
              22ITEM
                  1A. Risk Factors
              
              22ITEM
                  2. Unregistered Sales of Equity Securities and Use of
                  Proceeds
              
              22ITEM
                  3. Defaults Upon Senior Securities
              
              22ITEM
                  4. Submission of Matters to a Vote of Security Holders
              
              22ITEM
                  5. Other Information
              
              22ITEM
                  6. Exhibits
              
              22SIGNATURES
              
              26
  
  **PART
        I. FINANCIAL INFORMATION**
  **ITEM
        1. FINANCIAL STATEMENTS**
  **BIOPHAN
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 (A
        DEVELOPMENT STAGE COMPANY)
  **CONDENSED
        CONSOLIDATED BALANCE SHEETS**
  August  31,
              
              February 29,2008
              
              2008(Unaudited)ASSETSCurrent
                  assets:Cash
                  and cash equivalents
              
              $
              4,751,286
              
              $
              6,970,205Accounts
                  receivable
              
              
              264,745
              
              
              114,566Prepaid
                  expenses
              
              
              41,084
              
              
              103,212Other
                  current assets
              
              
              12,527
              
              
              44,437Total
                  current assets
              
              
              5,069,642
              
              
              7,232,420Property
                  and equipment, net
              
              
              212,860
              
              
              309,692Other
                  assets:Intangible
                  assets, net of amortization:Myotech,
                  LLC
              
              
              16,063,580
              
              
              17,120,242Other
              
              
              1,274,709
              
              
              1,320,128Deferred
                  financing costs, net of amortization of $931,749 and $683,283,
                  respectively
              
              
              600,461
              
              
              848,927Deposits
              
              
              206
              
              
              20617,938,956
              
              
              19,289,503Total
                  assets
              
              $
              23,221,458
              
              $
              26,831,615LIABILITIES
                  AND STOCKHOLDERS' EQUITYCurrent
                  liabilities:Current
                  portion of capital lease obligation
              
              $
              11,947
              
              $
              10,885Current
                  portion of senior secured convertible notes payable, net of discount
                  of
                  $1,400,617 and $1,297,913, respectively
              
              
              937,926
              
              
              1,428,251Accrued
                  Interest
              
              
              468,897
              
              
              331,548Accounts
                  payable and other accrued expenses
              
              
              1,057,720
              
              
              779,132Note
                  payable
              
              
              -
              
              
              58,864Current
                  portion of line of credit - former related party
              
              
              180,000
              
              
              1,200,000Due
                  to related parties
              
              
              136,504
              
              
              126,717Deferred
                  revenue
              
              
              83,333
              
              
              208,333Total
                  current liabilities
              
              
              2,876,327
              
              
              4,143,730Long-term
                  debt:Capital
                  lease obligation
              
              
              8,280
              
              
              14,795Line
                  of credit – former related party, net of current portion
              
              
              1,020,000
              
              
              -Senior
                  secured convertible notes payable, net of discount of $126,638
                  and
                  $853,599
              
              
              24,884
              
              
              345,628Fair
                  value of warrant liability
              
              
              524,954
              
              
              -Total
                  liabilities
              
              
              4,454,445
              
              
              4,504,153Minority
                  interest
              
              
              6,230,949
              
              
              7,053,950Stockholders'
                  equity:Common
                  stock, $.005 par value:Authorized,
                    250,000,000 Issued, 200,031,382 and 119,128,504 shares,
                    respectively
              
              
              1,000,157
              
              
              595,643Additional
                  paid-in capital
              
              
              79,613,846
              
              
              78,015,52780,614,003
              
              
              78,611,170Less
                  treasury stock, 4,923,080 shares, at cost
              
              
              (8,467,698
              )
              
              (8,467,698
              )72,146,305
              
              
              70,143,472Deficit
                  accumulated during the development stage
              
              
              (59,610,241
              )
              
              (54,869,960
              )Total
                  stockholders' equity
              
              
              12,536,064
              
              
              15,273,512Total
                  liabilities and stockholders' equity
              
              $
              23,221,458
              
              $
              26,831,615
  **See
        Notes to Condensed Consolidated Financial Statements**
  1
 
 **BIOPHAN
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 (A
        DEVELOPMENT STAGE COMPANY)
  **CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS**
 (Unaudited)
 Three Months Ended
                  August 31,
                
                Six Months Ended
                  August 31,
                
                Period from
                  August 1, 1968
                  (date of
                  inception)to2008
                
                2007
                
                2008
                
                2007
                
                August 31, 2008Revenues:Sale
                    of intellectual property
                
                $
                —
                
                $
                —
                
                $
                —
                
                $
                —
                
                $
                11,000,000Development
                    payments
                
                
                —
                
                
                —
                
                
                45,000
                
                
                —
                
                
                420,000License
                    fees
                
                
                62,500
                
                
                62,500
                
                
                125,000
                
                
                125,000
                
                
                1,416,666Grant
                    revenues
                
                
                —
                
                
                25,000
                
                
                —
                
                
                75,000
                
                
                100,000Testing
                    Services & Consulting fees
                
                
                45,000
                
                
                72,518
                
                
                159,214
                
                
                132,351
                
                
                1,187,622107,500
                
                
                160,018
                
                
                329,214
                
                
                332,351
                
                
                14,124,288Operating
                    expenses:Research
                    and development
                
                
                711,355
                
                
                1,497,837
                
                
                1,739,670
                
                
                2,817,784
                
                
                26,184,996General
                    and administrative
                
                
                1,046,575
                
                
                1,802,753
                
                
                2,079,714
                
                
                3,290,423
                
                
                31,876,589Write-down
                    of intellectual property rights
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                530,0001,757,930
                
                
                3,300,590
                
                
                3,819,384
                
                
                6,108,207
                
                
                58,591,585Operating
                    loss
                
                
                (1,650,430
                )
                
                (3,140,572
                )
                
                (3,490,170
                )
                
                (5,775,856
                )
                
                (44,467,297
                )Other
                    income(expense):Interest
                    income
                
                
                21,682
                
                
                4,990
                
                
                54,592
                
                
                20,431
                
                
                410,442Interest
                    expense
                
                
                (678,870
                )
                
                (1,234,622
                )
                
                (1,441,042
                )
                
                (1,714,326
                )
                
                (19,037,926
                )Additional
                    expense related to warrants
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (7,304,105
                )Change
                    in fair value of warrant liability
                
                
                (501,057
                )
                
                —
                
                
                (501,057
                )
                
                3,434,017
                
                
                9,156,221Loss
                    on extinguishment of debt
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                337,250Debt
                    forgiveness
                
                
                —
                
                
                197,614
                
                
                —
                
                
                197,614
                
                
                (3,859,240
                )Liquidated
                    damages
                
                
                —
                
                
                —
                
                
                —
                
                
                (652,500
                )
                
                (652,500
                )Other
                    income
                
                
                42,701
                
                
                5,763
                
                
                89,663
                
                
                33,939
                
                
                1,389,818Other
                    expense
                
                
                (9,368
                )
                
                —
                
                
                (16,545
                )
                
                —
                
                
                (87,073
                )(1,124,912
                )
                
                (1,026,255
                )
                
                (1,814,389
                )
                
                1,319,175
                
                
                (19,647,113
                )Loss
                    from continuing operations before minority interest in
                    subsidiaries
                
                
                (2,775,342
                )
                
                (4,166,827
                )
                
                (5,304,559
                )
                
                (4,456,681
                )
                
                (64,114,410
                )Minority
                    interest in subsidiaries
                
                
                182,261
                
                
                253,354
                
                
                459,158
                
                
                725,173
                
                
                4,488,406Loss
                    from continuing operations
                
                
                (2,593,081
                )
                
                (3,913,473
                )
                
                (4,845,401
                )
                
                (3,731,508
                )
                
                (59,626,004
                )Gain
                    from discontinued operations
                
                
                105,120
                
                
                —
                
                
                105,120
                
                
                —
                
                
                15,763Net
                    loss
                
                $
                (2,487,961
                )
                $
                (3,913,473
                )
                $
                (4,740,281
                )
                $
                (3,731,508
                )
                $
                (59,610,241
                )Net
                    loss per common share:Basic
                    and diluted
                
                $
                (0.01
                )
                $
                (0.05
                )
                $
                (0.03
                )
                $
                (0.05
                )Weighted
                    average shares outstanding
                
                
                174,871,171
                
                
                83,827,197
                
                
                154,847,870
                
                
                81,167,908
  **See
        Notes to Condensed Consolidated Financial Statements**
  2
  **BIOPHAN
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 (A
        DEVELOPMENT STAGE COMPANY)
  **CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS**
 (Unaudited)
 Six Months Ended August 31,
                
                Period from
                  August 1, 1968
                  (date of inception)
                  to August 31,2008
                
                2007
                
                2008Cash
                    flows from operating activities:Net loss
                
                $
                (4,740,281
                )
                $
                (3,731,508
                )
                $
                (59,610,241
                )Adjustments to reconcile net loss to net cash provided by (used
                    in)
                    operating activities:Amortization of intangible assets
                
                
                581,510
                
                
                736,022
                
                
                3,783,879Amortization of deferred financing costs
                
                
                248,466
                
                
                248,466
                
                
                931,749Depreciation and amortization
                
                
                41,962
                
                
                60,618
                
                
                418,620Loss on disposal of equipment
                
                
                11,437
                
                
                -
                
                
                29,118Gain on sale of investments
                
                
                (105,120
                )
                
                -
                
                
                (442,370
                )Non-cash charge related to warrants
                
                
                -
                
                
                -
                
                
                7,304,105Change in fair value of warrant liability
                
                
                501,057
                
                
                (4,339,214
                )
                
                (9,156,221
                )Realized and unrealized losses on marketable securities
                
                
                -
                
                
                -
                
                
                66,948Loss (gain) on extinguishment of debt
                
                
                -
                
                
                -
                
                
                3,859,240Amortization
                    of discount on convertible notes payable
                
                
                624,257
                
                
                1,910,971
                
                
                9,410,308Write-down of intellectual property rights
                
                
                -
                
                
                -
                
                
                530,000Amortization of discount on payable to related  party
                
                
                -
                
                
                -
                
                
                2,887,555Issuance of common stock for services
                
                
                94,662
                
                
                79,229
                
                
                758,964Fair value of beneficial conversion feature of debt
                
                
                -
                
                
                -
                
                
                3,021,197Issuance of common stock for interest
                
                
                393,690
                
                
                736,138
                
                
                1,816,392Grant of stock options for services
                
                
                103,052
                
                
                1,944,630
                
                
                9,424,311Expenses paid by stockholder
                
                
                -
                
                
                -
                
                
                2,640Change in investment in subsidiary, net
                
                
                163,585
                
                
                -
                
                
                242,655Minority interest
                
                
                (459,158
                )
                
                (772,301
                )
                
                (4,442,451
                )Change in operating assets and liabilities:(Increase)
                    in accounts receivable
                
                
                (177,805
                )
                
                (18,877
                )
                
                (284,871
                )Decrease
                    (increase) in due from related parties
                
                
                19,101
                
                
                -
                
                
                (40,199
                )Decrease
                    (increase) in prepaid expenses
                
                
                62,128
                
                
                (31,173
                )
                
                (41,084
                )(Increase)
                    in other current assets
                
                
                (38,727
                )
                
                (21,034
                )
                
                (41,826
                )Decrease
                    in deposits
                
                
                -
                
                
                3,498
                
                
                2,043Increase
                    in accounts payable and accrued expenses
                
                
                497,588
                
                
                22,988
                
                
                1,048,262Increase
                    in liquidating damages
                
                
                -
                
                
                652,500
                
                
                -(Decrease)
                    increase in due to related parties
                
                
                -
                
                
                (17,386
                )
                
                83,221(Decrease)
                    increase in deferred revenues
                
                
                (125,000
                )
                
                375,000
                
                
                83,333Net
                    cash used in operating activities
                
                
                (2,303,596
                )
                
                (2,161,433
                )
                
                (28,354,723
                )
  **See
        Notes to Condensed Consolidated Financial Statements**
  3
  **BIOPHAN
          TECHNOLOGIES, INC. AND SUBSIDIARIES**
 (A
        DEVELOPMENT STAGE COMPANY)
  **CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS**
 (Unaudited)
  Six Months Ended August 31,
              
              Period from
                August 1, 1968
                (date of
                inception) to
                August 31,2008
              
              2007
              
              2008Cash
                  flows from investing activities:Purchases of property and equipment
              
              
              (1,069
              )
              
              (4,392
              )
              
              (645,986
              )Sales of marketable securities
              
              
              -
              
              
              -
              
              
              2,369,270Purchase of investments
              
              
              -
              
              
              -
              
              
              (100,000
              )Net proceeds from sale of investments
              
              
              91,773
              
              
              -
              
              
              529,023Acquisition costs of intangible assets
              
              
              -
              
              
              -
              
              
              (616,583
              )Cash paid for investment in Myotech,  net of cash received of
                  $19,408
              
              
              -
              
              
              -
              
              
              (280,594
              )Cash paid for acquisition of Biophan Europe,  net of cash received of
                  $107,956
              
              
              -
              
              
              -
              
              
              (258,874
              )Purchases of marketable securities
              
              
              
              
              
              
              
              
              (2,436,218
              )Net
                  cash used in investing activities
              
              
              90,704
              
              
              (4,392
              )
              
              (1,439,962
              )Cash
                  flows from financing activities:Proceeds of bridge loans
              
              
              -
              
              
              -
              
              
              986,500Loan from stockholder
              
              
              -
              
              
              -
              
              
              143,570Line of credit borrowing from related party
              
              
              -
              
              
              -
              
              
              7,980,950Line of credit payments
              
              
              -
              
              
              -
              
              
              (2,072,500
              )Proceeds of convertible notes payable
              
              
              -
              
              
              -
              
              
              7,250,000Proceeds payments on debt and notes payable
              
              
              (574
              )
              
              (20,038
              )
              
              (528,925
              )Payments of capital lease obligation, net
              
              
              (5,453
              )
              
              (4,021
              )
              
              (6,822
              )Proceeds from sales of capital stock
              
              
              -
              
              
              40,049
              
              
              19,438,849Exercise of options
              
              
              -
              
              
              -
              
              
              658,467Exercise of warrants
              
              
              -
              
              
              -
              
              
              1,142,451Swing profits
              
              
              -
              
              
              -
              
              
              696,087Deferred financing costs
              
              
              -
              
              
              -
              
              
              (1,030,120
              )Deferred equity placement costs
              
              
              -
              
              
              -
              
              
              (112,536
              )Net
                  cash (used in) provided by financing activities
              
              
              (6,027
              )
              
              15,990
              
              
              34,545,971Net
                  (decrease) increase in cash and equivalents
              
              
              (2,218,919
              )
              
              (2,149,835
              )
              
              4,751,286Cash
                  and equivalents, beginning
              
              
              6,970,205
              
              
              2,418,551
              
              
              -Cash
                  and equivalents, ending
              
              $
              4,751,286
              
              $
              268,716
              
              $
              4,751,286
  **See
        Notes to Condensed Consolidated Financial Statements**
  4
  **BIOPHAN
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 (A
        DEVELOPMENT STAGE COMPANY)
  **CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS**
 (Unaudited)
  Six
                  Months Ended August 31,
              
              Period from
                August 1, 1968
                (date of
                inception) to
                August
                  31,2008
              
              2007
              
              2008Supplemental
                  schedule of cash paid for:Interest
              
              $
              8,179
              
              $
              2,558
              
              $
              254,228Supplemental
                  schedule of non-cash investing and financing
                  activities:
              
              
              
              
              $
              
              
              $Allocation
                  of proceeds from line of credit - related party to beneficial
                  conversion feature and warrants
              
              $
              -
              
              $
              -
              
              $
              2,812,555Allocation
                  of proceeds from notes payable and warrants
              
              $
              -
              
              $
              -
              
              $
              7,250,000Change
                  in fair value of warrants reclassified from equity to warrants
                  liability
              
              $
              23,897
              
              $
              5,964,729
              
              $
              779,773Capital
                  lease obligation
              
              $
              -
              
              $
              6,318
              
              $
              34,235Change
                  in fair value of warrant liability
              
              $
              501,057
              
              $
              -
              
              $
              6,655,849Discount
                  on senior secured convertible notes
              
              $
              -
              
              $
              -
              
              $
              2,636,612Forgiveness
                  of debt - line of credit
              
              $
              -
              
              $
              -
              
              $
              1,050,000Issuance
                  of common stock upon conversion of line of
                  credit loans
              
              $
              -
              
              $
              2,180,000
              
              $
              4,158,450Issuance
                  of common stock for principal payments for senior secured convertible
                  notes
              
              $
              1,435,326
              
              $
              1,789,361
              
              $
              4,372,720Issuance
                  of common stock for the acquisition of  initial 35% interest in
                  Myotech, LLC
              
              $
              -
              
              $
              -
              
              $
              8,467,698Issuance
                  of common stock in satisfaction of accounts payable
              
              $
              -
              
              $
              79,229
              
              $
              302,854Liabilities
                  assumed in conjunction with acquisition of 51% interest in Biophan
                  Europe
                  and certain intellectual property rights
              
              $
              -
              
              $
              -
              
              $
              178,384Issuance
                  of common stock upon of bridge loans
              
              $
              -
              
              $
              -
              
              $
              1,142,068Acquisition
                  of intellectual property
              
              $
              -
              
              $
              -
              
              $
              425,000Intellectual
                  property acquired through issuance of capital stock and assumption
                  of
                  related party payable
              
              $
              -
              
              $
              -
              
              $
              175,000
  **See
        Notes to Condensed Consolidated Financial Statements.**
  5
  **BIOPHAN
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 (A
        DEVELOPMENT STAGE COMPANY)
  **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **August
        31, 2008**
   **INTERIM
        FINANCIAL STATEMENTS:**
  The
        condensed consolidated financial statements as of August 31, 2008 and for
        the
        three and six months ended August 31, 2008 and 2007 are unaudited. However,
        in
        the opinion of management of the Company, these financial statements reflect
        all
        adjustments, consisting solely of normal recurring adjustments, necessary
        to
        present fairly the financial position and results of operations for such
        interim
        periods. The results of operations for the interim periods presented are
        not
        necessarily indicative of the results to be obtained for a full year. These
        unaudited condensed consolidated financial statements should be read in
        conjunction with the audited consolidated financial statements and notes
        thereto
        included in the Company's Annual Report on Form 10-K for the fiscal year
        ended
        February 29, 2008.
  **BASIS
        OF CONSOLIDATION:**
  The
        consolidated financial statements include the accounts of Biophan Technologies,
        Inc. ("Biophan"), its wholly owned subsidiaries, LTR Antisense Technology,
        Inc.
        ("Antisense") and Nanolution Technologies, Inc., formerly MRIC Drug Delivery
        Systems, LLC, ("Nanolution"), its majority owned subsidiaries Biophan Europe
        GmbH ("Biophan Europe"), formerly aMRIs GmbH, and TE Bio LLC ("TE Bio"),
        and
        Myotech, LLC ("Myotech"), collectively referred to as the "Company". During
        the
        six months ended August 31, 2008, Biophan Europe divested it’s ownership in a
        majority owned subsidiary, MR COMP GmbH (“MR Comp”), whose accounts are
        immaterial to the Company’s condensed consolidated financial statements. The
        Company does not anticipate incurring any future losses from MR Comp. All
        significant inter-company accounts and transactions have been eliminated
        in
        consolidation.
  **COMPANY
        HISTORY:**
  The
        Company was incorporated under the laws of the State of Idaho on August 1,
        1968
        and on January 12, 2000, changed its domicile to Nevada by merging into a
        Nevada
        corporation, and on July 19, 2001, changed its name to Biophan Technologies,
        Inc. From the inception of the current line of business on December 1, 2000,
        the
        Company has not generated any material revenues and operating profits.
        Therefore, the Company is in the development stage and will remain so until
        the
        realization of significant revenues and operating profits. The Company's
        ability
        to continue in business is dependent upon obtaining sufficient financing
        or
        attaining future profitable operations.
  **PRINCIPAL
        BUSINESS ACTIVITIES:**
  The
        primary mission is to develop and commercially exploit technologies for
        improving the performance of biomedical devices. The Company possesses
        technologies for enabling biomedical devices, both implantable and those
        used in
        diagnostic and interventional procedures, to be image compatible (to allow
        effective imaging of the device and its surrounding tissue) with MRI (magnetic
        resonance imaging). The Company also possesses technology for generating
        power
        for implantable devices from body heat, and a series of implantable devices
        including MRI-visible vascular implants such as a vena cava filter, a heart
        valve and an occluder for the treatment of atrial septal defects, a hole
        in the
        wall separating the left and right chambers of the heart. The Company's first
        licensee for several of these technologies is Boston Scientific (NYSE: BSX).
        The
        Company is also an owner of a majority interest in Myotech, developer of
        the
        Myotech Circulatory Support System (CSS) which does not contact circulating
        blood and utilizes technology that has the potential to become a standard
        of
        care for treating acute heart failure including sudden cardiac
        arrest.
 
 **INCOME
        TAXES:**
 
 Deferred
        tax assets and liabilities are recognized for future tax consequences
        attributable to differences between the financial statement carrying amounts
        of
        existing assets and liabilities and their respective tax bases. Deferred
        tax
        assets and liabilities are measured using enacted rates expected to apply
        when
        the differences are expected to be realized. Deferred tax assets are reduced
        by
        a valuation allowance when, in the opinion of management, it is more likely
        than
        not that some portion or all of the deferred tax assets will not be realized.
        Realization of the deferred income tax asset is dependent on generating
        sufficient taxable income in future years. The Company has recorded a 100%
        valuation allowance against net deferred tax assets due to uncertainty of
        their
        ultimate realization.
  6
  **BIOPHAN
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 (A
        DEVELOPMENT STAGE COMPANY)
  **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **August
        31, 2008**
  In
        June
        2006, the Financial Accounting Standards Board ("FASB") issued FASB
        Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an
        interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48 clarifies the
        accounting for uncertainty in income taxes recognized in a company's financial
        statements in accordance with SFAS No. 109, "Accounting for Income Taxes"
        FIN 48
        prescribes a recognition threshold and measurement attribute for the financial
        statement recognition and measurement of a tax position taken or expected
        to be
        taken in a tax return. The Company adopted FIN 48 effective March 1, 2007.
        The
        adoption of FIN48 did not have a material effect on it’s consolidated financial
        position or results of operations as the Company has no unrecognized tax
        liabilities and has not incurred any interest or penalties in any of its
        tax
        jurisdictions. It is the Company policy to charge interest and penalties
        incurred on the underpayment of income taxes to interest expense and
        other expense, respectively. The Company has open tax years beginning in
        fiscal years ended February 28, 2005 through February 29, 2008.
 
 **RECENT
        ACCOUNTING PRONOUNCEMENTS:**
  In
        September 2006, the FASB issued SFAS No. 157 ("SFAS 157"), "Fair
        Value Measurements." SFAS 157, as amended, defines fair value, establishes
        a
        framework for measuring fair value and expands disclosures regarding fair
        value
        measurements. SFAS 157 does not require any new fair value measurements but
        rather eliminates inconsistencies in guidance found in various prior accounting
        pronouncements. SFAS 157 is effective for fiscal years beginning after
        November 15, 2007. However, on December 14, 2007, the FASB issued
        proposed FSP FAS 157-b which delays the effective date of SFAS 157 for
        all nonfinancial assets and nonfinancial liabilities, except those that are
        recognized or disclosed at fair value in the financial statements on a recurring
        basis (at least annually). This proposed FSP partially defers the effective
        date
        of Statement 157 to fiscal years beginning after November 15, 2008,
        and accordingly, the Company’s adoption of this standard is limited to financial
        assets and liabilities and did not have a material effect on the Company’s
        financial condition or results of operations. The Company is currently
        evaluating the impact of this standard with respect to its effect on
        nonfinancial assets and liabilities and has not yet determined the impact
        that
        it will have on the consolidated financial statements upon full adoption.
 
 In
        February 2007, the Financial Accounting Standards Board issued Statement
        of
        Financial Accounting Standards No. 159, “The Fair Value Option for Financial
        Assets and Financial Liabilities” ("SFAS No. 159"). SFAS No. 159 permits
        companies to elect to follow fair value accounting for certain financial
        assets
        and liabilities in an effort to mitigate volatility in earnings without having
        to apply complex hedge accounting provisions. The standard also establishes
        presentation and disclosure requirements designed to facilitate comparison
        between entities that choose different measurement attributes for similar
        types
        of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning
        after November 15, 2007. The Company has not adopted the fair value option
        method permitted by SFAS No. 159.
  In
        June
        2007, the Financial Accounting Standards Board ratified EITF Issue
        No. 07-3, which clarifies the method and timing for recognition of
        nonrefundable advance payments for goods and services to be used or rendered
        in
        future research and development activities pursuant to an executory contractual
        arrangement. In particular, it addresses whether nonrefundable advance payments
        for goods or services that will be used or rendered for research and development
        activities should be expensed when the advance payment is made or when the
        research and development activity has been performed. The Company adopted
        the
        consensus in this Issue on March 1, 2008.
  In
        December 2007, the FASB issued SFAS No. 141(R), “Business
        Combinations” and SFAS No. 160, “Accounting and Reporting of
        Noncontrolling Interest in Consolidated Financial Statements, an amendment
        of
        ARB No. 51”. These new standards will significantly change the accounting
        for and reporting of business combinations and non-controlling (minority)
        interests in consolidated financial statements. Statement Nos. 141(R) and
        160
        are required to be adopted simultaneously and are effective for the first
        annual
        reporting period beginning on or after
        December 15, 2008. Earlier adoption is prohibited. SFAS Nos. 141(R)
        and SFAS 160 will be applied prospectively to business combinations with an
        acquisition date after the effective date. The adoption of SFAS Nos. 141(R)
        and 160 are expected to have an impact on the Company’s financial statements for
        current and future subsidiary investments.
  7
 
 **BIOPHAN
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 (A
        DEVELOPMENT STAGE COMPANY)
  **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 AUGUST
        31, 2008
 
 In
        December 2007, the Financial Accounting Standards Board (FASB) ratified the
        Emerging Issues Task Force (“EITF”) opinion related to EITF Issue 07-1,
“Accounting for Collaborative Arrangements.” The Task Force reached a consensus
        that a collaborative arrangement is a contractual arrangement that involves
        two
        or more parties, all of which are both (a) involved as active participants
        in a
        joint operating activity that is not conducted primarily through a separate
        legal entity and (b) exposed to significant risks and rewards that depend
        on the
        commercial success of the joint operating activity. This Issue also addresses
        (i) the income statement classification by participants in a collaborative
        arrangement for transactions with third parties and transactions between
        the
        participants and (ii) financial statement disclosures. The consensus on EITF
        Issue 07-1 is effective for fiscal years beginning after December 15, 2008,
        and
        for interim periods within those fiscal years. Entities should apply the
        consensus retrospectively to all periods presented for only those collaborative
        arrangement existing as of the the effective date, unless it is impractical
        to
        do so. The Company will adopt this new accounting pronouncement effective
        March
        1, 2009, and does not anticipate any material impact on its financial condition
        or results of operations.
 
 In
        April
        2008, the FASB issues FSP FAS 142-3, “Determination of Useful Life of Intangible
        Assets” (“FSP FAS 142-3”). FSP FAS 142-3 amends the factors that should be
        considered in developing the renewal or extension assumptions used to determine
        the useful life of a recognized intangible asset under FAS 142, “Goodwill and
        Other Intangible Assets.” FSP FAS 142-3 also requires expanded disclosure
        related to the determination of intangible asset useful lives. FSP FAS 142-3
        is
        effective for fiscal years beginning after December 15, 2008. The Company
        is
        currently evaluating the potential impact the adoption of FAS FSP 142-3 will
        have on its financial statements.
 
 In
        May
        2008, the FASB issued FASB Staff Position (“FSP”) APB 14-1, “Accounting for
        Convertible Debt Instruments that May be Settled in Cash upon Conversion
        (Include Partial Cash Settlement)” (“FSP APB 14-1”), which clarifies the
        accounting for convertible debt instruments that may be settled in cash upon
        conversion, including partial cash settlement. FSP APB 14-1 specifies that
        an
        issuer of such instruments should separately account for the liability and
        equity components of the instruments in a manner that reflect the issuer’s
        non-convertible debt borrowing rate when interest costs are recognized in
        subsequent periods. FSP APB 14-1 is effective for fiscal years beginning
        after
        December 15, 2008, and retrospective application is required for all periods
        presented. The Company is currently evaluating the potential impact of the
        adoption of FSP APB 14-1 on its financial statements.
 
 In
        May
        2008, the FASB issued SFAS No. 162 ”The Hierarchy of Generally Accepted
        Accounting Principles”. The purpose of this statement is to improve financial
        reporting by providing a consistent framework for determining applicable
        accounting principles to be used in the preparation of financial statements
        presented in conformity with accounting principles generally accepted in
        the
        United States of America. SFAS No. 162 will become effective 60 days after
        the
        SEC’s approval. The Company believes the adoption of this standard on its
        effective date will not have a material effect on the financial
        statements.
 
 In
        June
        2008, the FASB issued FSP EITF 03-6-1 to address whether instruments granted
        in
        share-based payment transactions are participating securities prior to their
        vesting and therefore need to be included in the earnings per share calculation
        under the two-class method described in SFAS 128, “Earnings per Share.” This FSP
        requires companies to treat unvested share-based payment awards that have
        non-forfeitable rights to dividends or dividend equivalents as participating
        securities and thus, include them in calculation of basic earnings per share.
        FSP EITF 03-6-1 is effective for fiscal years beginning after December 15,
        2008.
        The Company does not anticipate a material impact on its financial statements
        or
        its computation of basic earnings per share upon adoption.
  8
 
 **BIOPHAN
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 (A
        DEVELOPMENT STAGE COMPANY)
  **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 AUGUST
        31, 2008
 
 **INVESTMENT
        IN MYOTECH, LLC:**
 
 Effective
        November 30, 2005, we entered into a Securities Purchase Agreement for the
        acquisition of an initial 35% interest in Myotech, LLC ("Myotech"), a New
        York
        limited liability company, whereby we exchanged 4,923,080 shares of our common
        stock, par value $.005, for 3,768,488 Class A (voting) units of
        Myotech.
  Based
        upon the terms of the Securities Purchase Agreement, we were obligated to
        purchase for cash consideration of $2.225 million an additional 811,037 Class
        A
        units and could have elected to acquire up to an additional 3,563,097 Class
        A
        units for further cash consideration of up to $9.775 million, over a 24-month
        period, which would have resulted in the Company owning a majority interest
        in
        Myotech. Through October 1, 2007, Biophan provided an aggregate of $4,636,040
        of
        additional funding in exchange for 1,682,234 newly issued Class A units of
        Myotech, which raised our ownership percentage to 44.1%.
 
 On
        October 2, 2007, we entered into a revised Securities Purchase Agreement
        with
        Myotech pursuant to which the Company agreed to purchase from Myotech up
        to an
        additional 15,496,547 Class A membership units for an aggregate purchase
        price
        of $3,200,000. Prior to the execution of the Agreement, Biophan owned 5,408,194
        Class A membership units. Upon execution of the Agreement, Biophan purchased
        an
        additional 9,316,547 Class A membership units upon the payment of an aggregate
        initial purchase price of $1,200,000 bringing our ownership percentage as
        of
        November 30, 2007 to 68.02%. Thereafter, upon the satisfaction of certain
        conditions, Biophan had the right to purchase an additional 6,180,000 Class
        A
        membership units for a purchase price of $2,000,000, which would increase
        our
        ownership percentage to approximately 75%.
 
 On
        June
        30, 2008, we entered into an amendment to the Securities Purchase Agreement
        dated October 2, 2007, that upon completion of certain closing obligations,
        calls for us to purchase an additional 6,180,000 Class A membership units,
        for
        an aggregate purchase price of $2,000,000. Under the terms of this amendment,
        we
        have purchased a total of 1,854,000 Class A units for an aggregate total
        of
        $600,000, increasing our ownership to 70.6% as of August 31, 2008.
 
 The
        increase in our equity interest under the October 2, 2007 revised Securities
        Purchase Agreement and the June 30, 2008 amendment to the Securities Purchase
        Agreement for consideration of $1,200,000 and $600,000, respectively, was
        at a
        per-unit price that was less than the then book value per unit. The aggregate
        excess of the book value over the cost, or negative goodwill, in the amount
        of
        $5,194,163 was allocated to reduce the stated value of the Myotech intellectual
        property in consolidation.
 
 Prior
        to
        our obtaining a majority interest, we determined Myotech was a Variable Interest
        Entity within the meaning of FIN 46(R) and the Company is the primary
        beneficiary (as defined in FIN 46(R)). Consequently, the financial statements
        of
        Myotech have been consolidated with our consolidated financial statements
        for
        all periods ending on or after November 30, 2005, the date of our initial
        investment in Myotech.
 
 The
        following is selected financial data for Myotech, LLC for the six months
        ended:
 
 August
                  31,2008
              
              2007Total
                  current assets
              
              $
              152,727
              
              $
              11,443Intangible
                  assets, net of amortization
              
              
              21,008,700
              
              
              22,385,252Other
                  assets
              
              
              101,896
              
              
              155,687Total
                  assets
              
              $
              21,263,323
              
              
              22,552,382Current
                  liabilities
              
              $
              105,997
              
              $
              441,632Equity
              
              
              21,157,326
              
              
              22,110,750$
              21,263,323
              
              $
              22,552,382Net
                  loss from operations
              
              $
              (1,639,765
              )
              $
              (1,582,402
              )
  9
 
 **BIOPHAN
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 (A
        DEVELOPMENT STAGE COMPANY)
  **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 AUGUST
        31, 2008
 
 **LINE
        OF CREDIT AGREEMENTS:**
 
 On
        May
        27, 2005, we entered into a Line of Credit Agreement (LOC #1) with Biomed
        Solutions, LLC, at the time a related party, whereby Biomed agreed to provide
        a
        line of credit facility of up to $2 million. Upon the resignation of Biophan’s
        former CEO, Michael Weiner, on October 3, 2007 Biomed was no longer deemed
        a
        related party. Borrowings under the line bear interest at 8% per annum, are
        payable on demand and are convertible at Biomed's election into the Company's
        common stock at 90% of the average closing price for the 20 trading days
        preceding the date of borrowings under the line. In June 2005, the Company
        borrowed the entire $2 million under the line in two separate draws of $1
        million each. In accordance with the agreement, Biomed received warrants
        to
        purchase 500,000 shares of the Company's common stock at an exercise price
        of
        110% of the average closing price for the 20 trading days preceding the date
        of
        execution of the credit agreement. The Company recorded a discount on the
        borrowings of $958,160 due to the beneficial conversion feature of the note
        as
        well as for the value of the warrants which was valued utilizing the
        Black-Scholes Option Pricing Model. The discount was amortized as additional
        interest expense over the term of the note. In August 2005, Biomed elected
        to
        convert $1 million of the note plus accrued interest into 480,899 shares
        of
        common stock at which time the remaining discount related to the $1 million
        portion of the loan was fully expensed. On October 7, 2005, we repaid $500,000
        of principal and all accrued interest on the loan. The balance of borrowings
        on
        the line was $500,000 at August 31, 2008 and 2007.
  On
        January 24, 2006, we entered into an additional Line of Credit Agreement
        (the
        "Line of Credit Agreement") (LOC #2) with Biomed Solutions, LLC, pursuant
        to
        which Biomed committed to make advances to us, in an aggregate amount of
        up to
        $5,000,000. Amounts borrowed bear interest at the rate of 8% per annum, and
        principal and interest were convertible into shares of our Common Stock at
        the
        rate of $1.46 per share. Biomed's obligation to lend to us under the Line
        of
        Credit Agreement expired on June 30, 2007, on which date the entire amount
        borrowed by us (and not converted into shares of our Common Stock) became
        due
        and payable. In connection with the establishment of the credit facility,
        we
        issued to Biomed a warrant to purchase up to 1,198,630 shares of our Common
        Stock at an exercise price of $1.89 per share. The Company recorded a discount
        on the borrowings of $1,678,425 due to the beneficial conversion feature
        of the
        note as well as for the value of the warrant.
  On
        October 11, 2006, in connection with our Securities Purchase Agreement dated
        October 11, 2006 with Iroquois Master Fund Ltd and other private investors
        (the
        "Purchase Agreement"), we amended our January 24, 2006 Line of Credit Agreement
        (the "Biomed Line of Credit Agreement") with Biomed and the Convertible
        Promissory Note in the original principal amount of $5,000,000 issued by
        us to
        Biomed on January 24, 2006 pursuant to the Biomed Line of Credit Agreement
        (the
        "$5,000,000 Biomed Note"). The amendment reduced the price at which the
        $5,000,000 Biomed Note is convertible into shares of our Common Stock from
        $1.46
        per share to a conversion price of $0.67. In connection with the Purchase
        Agreement, we also entered into a Subordination and Standstill Agreement
        (the
        "Subordination Agreement") with Biomed and the investors who are parties
        to the
        Purchase Agreement, pursuant to which Biomed agreed (i) to subordinate its
        rights to payment under the $5,000,000 Biomed Note and the Convertible
        Promissory Note in the original principal amount of $2,000,000 issued by
        us to
        Biomed on May 27, 2005 to the rights of the investors under the Notes and
        (ii)
        to convert the entire outstanding amount of principal and interest due under
        the
        $5,000,000 Biomed Note in excess of $700,000 into shares of our common stock
        upon the effectiveness of an amendment to our Articles of Incorporation to
        increase the number of our authorized shares which was effective May 9, 2007.
        On
        July 19, 2007, Biomed converted $2,180,000 of principal and $195,899 of accrued
        interest into a total of 3,546,118 shares of our common stock leaving a balance
        outstanding at August 31, 2007 of $1,750,000. On November 5, 2007, Biophan
        and
        Biomed entered into a Settlement Agreement with SBI to settle all claims,
        causes
        of action and disputes between and among them. As a result of SBI’s forgiveness
        of Biomed’s debt, Biomed forgave $1,050,000 of the Biophan’s Line of Credit
        leaving a balance outstanding of $700,000 as of August 31, 2008 and $1,750,000
        at May 31, 2007. This forgiveness of debt by Biomed, a stockholder of the
        Company at that time, was recorded as a credit to additional paid-in capital
        in
        stockholders’ equity.
 
 The
        total
        balance of borrowings on the lines of credit was $1,200,000 plus accrued
        interest and $2,250,000 plus accrued interest at August 31, 2008 and 2007,
        respectively. On September 23, 2008, the Company amended the line of credit
        agreements, extending the combined term to December 31, 2012 in exchange
        for
        monthly cash payments of $15,000. See Subsequent Events for additional
        information.
  The
        fair
        value of the notes is not readily determinable as there is a limited market
        for
        such related party debt.
  10


**BIOPHAN
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 (A
        DEVELOPMENT STAGE COMPANY)
  **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 AUGUST
        31, 2008
 
 **SENIOR
        SECURED CONVERTIBLE NOTES:**
 
 On
        October 11, 2006, we entered into a Securities Purchase Agreement (the "Purchase
        Agreement") with 10 private investors led by Iroquois Master Fund Ltd
        ("Iroquois"). Pursuant to the Purchase Agreement, on October 12, 2006 we
        issued
        $7,250,000 of Senior Secured Convertible Notes (the "Notes") to the investors
        and received proceeds of $6,219,880 after paying estimated fees and expenses
        of
        $1,030,120 related to the transaction. The holders of the Notes may elect
        to
        convert the Notes at any time into shares of our common stock based upon
        a price
        of $0.67 per share (the "Conversion Price"). Interest on the outstanding
        principal amount under the Notes is payable quarterly at a rate equal to
        the
        six-month London InterBank Overnight Rate plus 500 basis points, with a minimum
        rate of 10% per annum and a maximum rate of 12% per annum, payable at our
        option
        in cash or shares of our common stock registered for resale under the Securities
        Act of 1933, as amended (the "Securities Act"). If we elect to make principal
        or
        interest payments in common stock, the number of shares issuable by us will
        be
        based upon the lower of (i) 90% of the 20-day trailing average volume weighted
        average price per share as reported on Bloomberg LP (the "VWAPS") or (ii)
        the
        Conversion Price. Principal on the Notes amortizes and payments are due in
        33
        equal monthly installments commencing four months following issuance of the
        Notes, and may be made at our option in cash or shares of our common stock
        registered for resale under the Securities Act. Our obligations under the
        Notes
        are secured by a first priority security interest in substantially all of
        our
        assets pursuant to a Security Agreement
        dated as of October 11, 2006 among us, the investors and Iroquois, as agent
        for
        the investors (the "Security Agreement").  The scheduled maturity date of
        the notes is October 2009.
 
 As
        further consideration to the investors, we issued to the investors one-year
        warrants to purchase an aggregate of 10,820,896 shares of our common stock
        at a
        price of $0.67 per share. If the investors had elected to exercise these
        one-year warrants, they would have received additional five-year warrants
        to
        purchase the shares of our common stock equal to the number of shares purchased
        under the one-year warrants, with 50% of the additional warrants having an
        exercise price of 115% of the per share purchase price, and the remaining
        50% of
        the additional five-year warrants having an exercise price of 125% of the
        per
        share purchase price. These one year warrants expired May 7, 2008. We also
        issued to the investors five-year warrants to purchase an aggregate of
        10,820,896 shares of our common stock. The first five-year warrants allowed
        for
        the purchase of 5,410,448 shares of our common stock at an exercise price
        of
        $0.81 per share, and the second five-year warrants allowed for the purchase
        of
        5,410,448 shares of our common stock at an exercise price of $0.89 per share.
        The warrants contain anti-dilution protection that, should we issue equity
        or
        equity-linked securities at a price per common share below the exercise price
        of
        the five-year warrants, it will automatically adjust the exercise price of
        the
        warrants to the price at which we issue such equity or equity-linked securities.
        The total fair value of the warrants was $14,554,105 which was calculated
        utilizing the Black-Scholes Option Pricing Model. The Company recorded a
        discount on the Notes of $7,250,000 for the fair value of the related warrants.
        The excess of the fair value of the warrants over the carrying value of the
        notes, which amounted to $7,304,105, was recognized as additional expense
        related to warrants in the statement of operations for the year ended February
        28, 2007. The discount on the Notes is being amortized over the life of the
        Notes using the effective interest method. The discount amortization for
        the
        year ended February 29, 2008 and February 28, 2007 amounted to $3,200,692
        and $1,707,066, respectively and is included in interest expense in the
        accompanying statements of operations.
 
 On
        February 21, 2007, we entered into a Forbearance Agreement (the "Forbearance
        Agreement") with the investors pursuant to which the investors agreed that,
        during the period commencing on February 16, 2007 and ending on the earlier
        of
        (i) March 31, 2007 or (ii) the date on which any Termination Event (as defined
        in the Forbearance Agreement) first occurs (the "Forbearance Period"), they
        will
        forbear from exercising any and all of the rights and remedies which they
        may
        have against us or any of our assets under the Notes or the Purchase Agreement
        or at law or in equity as a result of any default under the Notes or as a
        result
        of the occurrence of certain events with respect to the Purchase Agreement.
        In
        exchange for entering into the Forbearance Agreement, we issued pro rata
        to the
        investors three-year warrants for the purchase of an aggregate of 60,000
        shares
        of our common stock at an exercise price of $0.51 per share (the "Fee
        Warrants"). The warrants were valued at $19,980, utilizing the Black-Scholes
        Option Pricing Model and charged to expense. In consideration for a payment
        of
        $652,500 on October 9, 2007 all the existing defaults under the Notes or
        Purchase Agreement were waived.
  11
 
 **BIOPHAN
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 (A
        DEVELOPMENT STAGE COMPANY)
  **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 AUGUST
        31, 2008
 
 Upon
        the
        issuance of the Fee Warrants, the exercise prices of the five-year warrants
        issued to the investors pursuant to the Purchase Agreement (the "Original
        Warrants") for the purchase of an aggregate of 10,820,896 shares of our common
        stock were automatically adjusted from $0.81 per share and $0.89 per share,
        respectively, to $0.51 per share, and the number of shares of our common
        stock
        issuable upon exercise of the Original Warrants was automatically adjusted,
        proportionately, to an aggregate of 18,034,830 shares. In the Forbearance
        Agreement, the investors waived, with respect to the issuance of the Fee
        Warrants, application of similar anti-dilution adjustments contained in the
        Notes and in a third series of warrants for the purchase, on or before October
        12, 2007, of an aggregate of 10,820,896 additional shares of our common stock
        at
        an exercise price of $0.67 per share (the "One Year Warrants"). Collins Stewart,
        LLC, formerly known as C.E. Unterberg Towbin, which holds a warrant for the
        purchase of 865,672 shares of our common stock at an exercise price of $0.67
        per
        share, issued to it in connection with its services as exclusive placement
        agent
        under the Purchase Agreement, separately agreed to waive, with respect to
        the
        issuance of the Fee Warrants, application of the anti-dilution provisions
        set
        forth in that warrant. Because the anti-dilution adjustment to the Original
        Warrants is accounted for as a modification of the Original Warrants, we
        recorded an expense in the amount of $5,318,064 for this modification in
        the period ended February 28, 2007.
 
 On
        October 3, 2007, we entered into Amendment No. 1 to the Securities Purchase
        Agreement, Senior Secured Convertible Notes, Warrants and Security Agreement
        with the independent private investors. Pursuant to the Amendment, we agreed
        to
        amend the Notes to provide that even if we elect to make a monthly installment
        payment in cash, the holder will have the right to request payment in common
        stock of the Company. In addition, the Conversion Price was reduced to $0.15.
        As
        of August 31, 2008 2,440,000 shares have been converted at $0.15.  The
        Amendment also amended the warrants to reduce the exercise prices of the
        various
        warrants to $0.23. In exchange for the foregoing, the investors released
        certain
        intellectual property for the Security Agreement, allowing the Company to
        transfer and sell such intellectual property. Further, in the Amendment,
        we
        agreed to certain spending covenants in connection with the proceeds we received
        from the sale of the intellectual property under the Intellectual Property
        Assignment Agreement dated as of August 6, 2007 by and between Biophan and
        Medtronic, Inc. For accounting purposes, these amendments as they pertain
        to
        re-pricing of the convertible debt and warrants, have been treated as an
        extinguishment of the old debt. Accordingly, during fiscal 2008 the remaining
        unamortized discount on the old debt of $3,352,581 was written off, a loss
        on
        extinguishment of $3,189,187 on the old debt was recognized, and a new discount
        in the amount of $2,636,612 was recorded. In addition, a beneficial conversion
        charge to interest expense was recorded in the amount of
        $3,021,197.
  On
        February 7, 2008, the Securities Purchase Agreement was amended further to,
        among other things, allow the Company to withdraw the Registration Statement
        on
        Form S-1 (SEC File Number 333-146930) which was filed with the Securities
        and
        Exchange Commission on October 25, 2007 on behalf of the Investors, without
        any
        liquidated damages or penalties or further obligations to file a registration
        statement in connection with any securities held by the Investors. While
        the
        Registration Statement was pending, in order to continue to satisfy its payment
        obligations to the Investors under the Agreement, the Company issued 11,869,235
        shares of its common stock from November 30, 2007 through February 29, 2008.
        The
        shares were issued without registration under the Securities Act of 1933
        in
        reliance on the exemption provided in Section 4(2) of such Act. In exchange,
        we
        agreed to change the definition of Market Price if the average for the 20
        Trading Days ending immediately prior to the applicable Principal Payment
        Date
        is below $0.15 (the conversion price). Market Price will be calculated on
        80% of
        the arithmetic average of the VWAP for each of the 20 Trading Days ending
        immediately prior to the applicable Principal Payment Date. The discount
        from
        the market price of 20% is recognized as additional interest
        expense.
  The
        outstanding principal on the senior secured convertible notes was $2,490,065
        and
        $6,000,878 at August 31, 2008 and 2007, respectively. In the unaudited condensed
        consolidated balance sheets, the senior secured convertible notes are presented
        net of the unamortized discount associated with the warrants issued in
        connection with the notes, equal to $1,527,255 and $3,631,963 at August 31,
        2008
        and 2007, respectively.
 
 On
        September 24, 2008 we prepaid the Senior Secured Convertible Notes in their
        entirety. See Subsequent Events for additional information.
  12
 
 **BIOPHAN
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 (A
        DEVELOPMENT STAGE COMPANY)
  **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 AUGUST
        31, 2008
 
 **FAIR
        VALUE OF WARRANT LIABILITY:**
  In
        accordance with the guidance provided by EITF 00-19, “Accounting for Derivative
        Financial Instruments Indexed to and Potentially Settled in, a Company's
        Own
        Stock”, we have recorded a liability for the fair value of the warrants related
        to the Senior Secured Convertible Notes from time to time in order to provide
        for the possibility that we would not be able to comply with the registration
        rights of the lenders as contained in the Securities Purchase Agreement because
        we did not have sufficient available authorized shares to execute a potential
        conversion of the Notes and related warrants and thus we would be required
        to
        settle the contract in cash. Therefore, we would be required to reclassify
        warrants from equity to a warrant liability account and based on the fair
        value
        of the warrants at the time, reverse this transaction when the condition
        no
        longer exists.
 
 Accordingly,
        on July 10, 2008, the date the liability was triggered, the Company reclassified
        warrants with a value of $23,897 from equity to the warrant liability, and
        on
        August 31, 2008 adjusted to its fair value of $524,954.
 
 As
        noted
        above, the fair value of the warrant liability related to the Senior Secured
        Convertible Notes is volatile. Several factors and underlying assumptions
        are
        included in the Black-Scholes model utilized to derive the fair value of
        the
        warrants. The factors and assumptions are as follows:
 
 1.)
              The
                  number of warrants: varies from time to time dependent upon current
                  period
                  grants, conversion, forfeitures, and
                  expirations,
 2.)
              Term
                  of expiration: expiration dates vary by grant and currently range
                  from 1
                  to 3.5 years,
 3.)
              Market
                  price at the valuation date: $0.015/share at July 10, 2008; $0.019/share
                  at August 31, 2008;
 4.)
              Exercise
                  price of the warrants: varies by
                  grant,
 5.)
              Dividend
                  yield: assumed to be zero
 6.)
              Interest
                  rate; we use the US Federal Reserve – “Treasury constant maturities rates”
                  at the measurement date matched to the maturities of the warrants.
                  The
                  rates change over time and the maturities of the warrants change
                  over
                  time.
 7.)
              Company
                  stock price volatility on a look-back basis as a proxy for expected
                  future
                  volatility in stock price. We use the look-back
                  approach.
 
 While
        most of these factors changed during the period from July 10, 2008 to August
        31,
        2008, the most significant factors impacting the change in fair value were
        the
        change in number of warrants, relative to the increase in outstanding shares
        and
        given share-based payments made on the Senior Secured Convertible Notes and
        the
        1,700,000 options granted during the quarter ended August 31, 2008, and the
        change in stock price.
  **STOCKHOLDERS'
        EQUITY:**
  The
        following changes in stockholders’ equity took place during the six months ended
        August 31, 2008:
 
 Event
              
              Number of
                Shares
                Issued
              
              Common Stock
              
              Additional Paid
                in CapitalBalance
                  at February 29, 2008
              
              
              119,128,504
              
              $
              595,643
              
              $
              78,015,527Shares
                  issued for principal and interest on convertible notes
              
              
              77,301,559
              
              
              386,507
              
              
              1,442,508Shares
                  issued to directors
              
              
              900,000
              
              
              4,500
              
              
              31,500Shares
                  issued for services
              
              
              2,701,319
              
              
              13,507
              
              
              45,156Stock
                  option expense
              
              
              -
              
              
              -
              
              
              103,052Recognition
                  of fair value of warrant liability
              
              
              -
              
              
              -
              
              
              (23,897
              )Balance
                  at August 31, 2008
              
              
              200,031,382
              
              $
              1,000,157
              
              $
              79,613,846
  13
 
 **BIOPHAN
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 (A
        DEVELOPMENT STAGE COMPANY)
  **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 AUGUST
        31, 2008
 
 **STOCK-BASED
        COMPENSATION PLANS:**
  The
        Company accounts for stock-based compensation in accordance with SFAS No.
        123R,
        "Share-Based Payment," using the fair value recognition provisions of SFAS
        No.
        123, "Accounting for Stock-Based Compensation." The Company recognized expense
        under SFAS No. 123R in the amount of $103,052 for the six months ended August
        31, 2008. The related impact on basic and diluted earnings per share for
        the
        quarter ended August 31, 2008 was immaterial. There was no impact on the
        Company's cash flow.
  The
        Company’s stock incentive plans consist of the Biophan Technologies, Inc. 2001
        Stock Option Plan, the Biophan Technologies, Inc. 2006 Incentive Stock Plan
        and
        the 2008 Incentive Stock Plan (the “Plans”) which are shareholder approved.
 The Plans provide for the grant of incentive and non-qualified stock
        options to selected employees, and the grant of non-qualified options and
        other
        stock-based awards to selected consultants, o directors and advisory board
        members. The Plans are administered by the Compensation Committee of the
        Board
        and authorizes the grant of options or restricted stock awards for 13,000,000
        shares under the 2001 Plan, 7,500,000 shares under the 2006 Plan and 10,000,000
        shares under the 2008 Plan. The Compensation Committee determines which eligible
        individuals are to receive options or other awards under the Plans, the terms
        and conditions of those awards, the applicable vesting schedule, the option
        price and term for any granted options, and all other terms and conditions
        governing the option grants and other awards made under the Plans. The Company
        typically funds exercised options with previously unissued shares. Non-employee
        directors also receive periodic restricted stock grants pursuant to the
        automatic grant program in effect for them under the 2008 Plan. Some of the
        Company's outstanding option agreements contain performance milestones as
        a
        condition for vesting. In accordance with Statement of Accounting Standard
        No.
        123(R), "Share Based Payments," the Compensation Committee periodically
        evaluates the probability these milestones will be met and records compensation
        expense when it is determined that the condition is probable of being satisfied.
        During the quarter ended August 31, 2008, none of the criteria for vesting
        of
        outstanding performance options were met.
 
 The
        fair
        value of each option award was estimated on the date of grant using the
        Black-Scholes option valuation model using the assumptions noted as follows:
        Expected volatilities are based on historical volatility of the Company's
        stock,
        management's estimate of implied volatility of the Company's stock, and other
        factors. The expected term of options granted is derived from the vesting
        period
        of the award, as well as historical exercise behavior, and represents the
        period
        of time that options granted are expected to be outstanding. The risk-free
        rate
        is calculated using the U.S. Treasury yield curve, and is based on the expected
        term of the option. The Company uses historical data to estimate
        forfeitures.
  1,700,000
        options were granted during the six months ended August 31, 2008. The
        Black-Scholes option pricing model was used with the following weighted-average
        assumptions for options granted during the six months ended August 31,
        2008:
 
 Risk-free
                  interest rate
              
              
              2.70
              %Expected
                  option live
              
              
              10.0
                  yearsExpected
                  volatility
              
              
              310.73
              %Expected
                  dividend yield
              
              
              0.0
              %
  Further
        information relating to stock options is as follows:
  WeightedWeighted
              
              AverageNumber
              
              Average
              
              Remainingof
              
              Exercise
              
              ContractShares
              
              Price
              
              Life (years)Outstanding
                  options at 2/29/08
              
              
              15,503,891
              
              $
              0.63Granted
              
              
              1,700,000
              
              
              0.02
              
              
              9.74Exercised
              
              
              -
              
              
              -
              
              
              -Forfeited/expired
              
              
              -
              
              
              -
              
              
              -Outstanding
                  options at 8/31/08
              
              
              17,203,891
              
              $
              0.57
              
              
              7.16Exercisable
                  on 8/31/08
              
              
              14,552,224
              
              $
              0.57
              
              
              6.95
  14
 
 **BIOPHAN
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 (A
        DEVELOPMENT STAGE COMPANY)
  **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 AUGUST
        31, 2008
 
 The
        following table summarizes our non-vested stock option activity for the six
        months ended August 31, 2008
  Non-vested stock option activityWt'd Avg Grant-DateNo of Shares
              
              Fair ValueNon-vested
                  stock options at 2/29/08
              
              
              1,941,667
              
              $
              0.73Granted
              
              
              1,700,000
              
              
              0.02Vested
              
              
              (990,000
              )
              $
              0.15Forfeited/expired
              
              
              -
              
              
              -Non-vested
                  stock options at 8/31/08
              
              
              2,651,667
              
              $
              0.56
 
 As
        of
        August 31, 2008 there was approximately $98,932 of total unrecognized
        compensation cost related to unvested options. The cost is expected to be
        recognized over a weighted-average period of 2.7 years.
 
 The
        options have contractual terms ranging from five to ten years. The aggregate
        intrinsic value of shares outstanding and exercisable was $0 at August 31,
        2008
        as the market price of the Company's common stock was below the weighted-average
        exercise price of substantially all of the options. Total intrinsic value
        of
        options exercised was $0 for the quarter ended August 31, 2008 as no options
        were exercised during this period.
  At
        August
        31, 2008, shares available for future stock option grants to employees and
        others under the 2001 Stock Option Plan, the 2006 Incentive Stock Plan and
        the
        2008 Incentive Stock Plan were 44,480, 26,566 and 4,698,681
        respectively.
  **EARNINGS
        PER SHARE:**
 
 If
        the
        Company had generated earnings during the six-month period ended August 31,
        2008, no common stock equivalent shares would have been added to the weighted
        average shares outstanding as no options have exercise prices below the average
        fair value of the Company’s stock during the period.
 
 **CONTINGENCIES:**
 
 We
        are
        not a party to any material legal proceedings and there are no material legal
        proceedings pending with respect to our property, except as noted below.
        We are
        not aware of any legal proceedings contemplated by any governmental authorities
        involving either us or our property. None of our directors, officers or
        affiliates is an adverse party in any legal proceedings involving us or our
        subsidiaries, or has an interest in any proceeding which is adverse to us
        or our
        subsidiaries.
 
 On
        April
        17, 2008, the Company reached an agreement to terminate the Company’s forward
        funding commitments with Biophan Europe GmbH. As a result, it’s likely the
        Company's ownership percentage in Biophan Europe will be reduced and the
        Company
        will no longer be required to consolidate this entity. Management believes
        this
        will not have a material effect on the Company's condensed consolidated
        financial statements in future periods. In addition, on May 5, 2008 Biophan
        Europe settled a dispute with a minority shareholder whereby Biophan Europe
        paid
        the shareholder $80,000 and agreed to issue 150,000 shares of the Company’s
        stock valued at approximately $2,250. The settlement will allow Biophan Europe
        to pursue future funding of its operations without
        restrictions.
  15
 
 **BIOPHAN
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 (A
        DEVELOPMENT STAGE COMPANY)
  **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 AUGUST
        31, 2008
  **SUBSEQUENT
        EVENTS:**
 
 On
        September 24, 2008, Biophan Technologies, Inc. (the “Company”) announced
        execution of a prepayment agreement with the holders of its Senior Secured
        Convertible Notes. Pursuant to the prepayment agreement, the holders of the
        Secured Convertible Notes accepted a prepayment of the remaining $2.3 million
        in
        senior debt, in exchange for an aggregate cash payment of $2.15 million plus
        delivery of 18 million shares of the Company’s common stock. In connection with
        this transaction, note holders were offered additional shares in exchange
        for
        surrendering their warrants to purchase the Company’s common stock, issued in
        connection with the Senior Secured Convertible Notes.. Warrants to purchase
        17
        million shares of common stock were redeemed leaving outstanding warrants
        to
        purchase 23 million shares of the Company’s common stock All of the remaining
        warrants have an exercise price of $0.23 per share.
 
 In
        addition to repaying the Senior Secured Convertible Notes, the Company announced
        entry into an agreement with Biomed Solutions, LLC (“Biomed”) on September 23,
        2008, amending the Company’s subordinated Line of Credit Agreements. The
        amendment extends the terms of the Line of Credit Agreements with Biomed
        until
        December 31, 2012, in exchange for monthly cash payments equal to $15,000.
 
 **ITEM
        2** . **MANAGEMENT'S
        DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF
        OPERATIONS**
 
 **Forward
        Looking Statements**
  This
        report on Form 10-Q contains statements that are considered forward-looking
        statements. Forward-looking statements give the Company's current expectations
        and forecasts of future events. All statements other than statements of current
        or historical fact contained in this annual report, including statements
        regarding the Company's future financial position, business strategy, budgets,
        projected costs and plans and objectives of management for future operations,
        are forward-looking statements. The words "anticipate," "believe," "continue,"
        "estimate," "expect," "intend," "may," "plan," and similar expressions, as
        they
        relate to the Company, are intended to identify forward-looking statements.
        These statements are based on the Company's current plans, and the Company's
        actual future activities and results of operations may be materially different
        from those set forth in the forward-looking statements. These forward-looking
        statements are subject to risks and uncertainties that could cause actual
        results to differ materially from the statements made. Any or all of the
        forward-looking statements in this report may turn out to be inaccurate.
        The
        Company has based these forward-looking statements largely on its current
        expectations and projections about future events and financial trends that
        it
        believes may affect its financial condition, results of operations, business
        strategy and financial needs. The forward-looking statements can be affected
        by
        inaccurate assumptions or by known or unknown risks, uncertainties and
        assumptions. The Company undertakes no obligation to publicly revise these
        forward-looking statements to reflect events occurring after the date hereof.
        All subsequent written and oral forward-looking statements attributable to
        the
        Company or persons acting on its behalf are expressly qualified in their
        entirety by the cautionary statements contained in this report.
 
 **GENERAL**
  Our
        primary mission is to develop and commercially exploit novel medical device
        technologies to improve the delivery of healthcare. We do not currently employ
        our own manufacturing or distribution channels but rather rely on relationships
        with sub-contractors and/or partner companies. We develop technology protected
        by strong intellectual property targeted at specific markets within the medical
        technology sector.
  16
 
 **COMPANY
        BUSINESS**
  During
        the six-month period ended August 31, 2008:
 ·
                We
                    recognized approximately $329,000 in revenue from licensing,
                    development
                    payments, MRI testing, and consulting fees.·
                We
                    have continued our efforts to seek marketing and development
                    partners for
                    both the Myotech Circulatory Support System (CSS), a lifesaving
                    device
                    that provides benefits and competitive advantages not possible
                    with other
                    circulatory support devices, and the MRI compatible devices and
                    technologies developed by our Biophan Europe subsidiary·
                We
                    have continued working under a Cooperative Research and Development
                    Agreement (CRADA) with the FDA's Office of Science and Engineering
                    Laboratories (OSEL) to research and define methods for measuring
                    MRI
                    safety of medical implants by examining the leads of cardiac
                    rhythm
                    management and neurostimulation devices.·
                We
                    have filed additional grants applications related to our other
                    technologies, including technologies to employ patented pulsewidth
                    modulation techniques to improve the battery life of implantable
                    devices
                    such as pacemakers, and patented technologies to employ chaos
                    theory
                    calculations to improve the diagnosis and treatment of atrial
                    fibrillation. So far, we have filed over $2 million in grant
                    applications
                    this year.·
                Biophan's
                    Board approved the purchase of the patent assets of Nanoset LLC
                    that had
                    previously been exclusively licensed for medical applications.  The
                    purchase allows Biophan to exploit the technology disclosed in
                    these
                    patents and applications in non-medical markets and eliminates
                    annual
                    minimum royalty payments.  The Nanoset patents cover the compositions
                    of matter, manufacturing methods, and device designs that employ
                    nanomagnetic materials that can potentially be used to shield
                    against
                    unwanted electromagnetic energy, enhance the quality of magnetic
                    resonance
                    images of implanted devices such as stents, or be used as contrast
                    media
                    for MRI procedures.
 **RESULTS
        OF OPERATIONS**
  The
        following comments discuss the significant factors affecting the consolidated
        operating results of the Company comparing the three months ended August
        31,
        2008 to the three months ended August 31, 2007 and the six months ended August
        31, 2008 to the six months ended August 31, 2007.
  **Comparison
        of the Three Months Ended August 31, 2008 to the Three Months Ended August
        31,
        2007.**
  **Revenues** **:**
 Revenues
        were $108,000 for the three months ended August 31, 2008 as compared to $160,000
        for the three months ended August 31, 2007. The net decrease of $52,000 was
        due
        to a $25,000 decrease in grant revenue from the same period in 2007 related
        to
        the Biothermal Power Source technology. There was also a decrease of $72,000
        in
        consulting services performed by both Biophan Europe and MR Comp, offset
        by an
        increase of $45,000 in transition service revenue provided to Medtronic,
        Inc. in
        connection with the sale of intellectual property rights to Medtronic in
        the
        Fall of 2007. The Company plans to continue to generate revenue under the
        existing licensing agreement with Boston Scientific, the transitional services
        arrangement with Medtronic, and will continue to seek other sources of grant
        revenues.
  **Research
        and Development Expenses** **:**
 Research
        and development expenses decreased by 52%, or $786,000. After factoring out
        the
        decrease in non-cash stock-based compensation expense from 2007 to 2008 of
        $487,000 and the decrease in depreciation and amortization of $75,000, the
        overall decrease is attributable generally to our planned reductions in spending
        on our research and development projects ($172,000) and research and development
        salaries ($97,000), offset by increases in patent legal expenses ($40,000),
        and
        overhead ($5,000) Further cost reduction measures in the research and
        development area will be dependent upon how successful the Company is in
        securing additional funding through research grants.
  **General
        and Administrative Expenses** **:**
 General
        and administrative expenses decreased by 42%, or $756,000. After factoring
        out
        the decrease in non-cash stock-based compensation expense from 2007 to 2008
        of
        $1,046,000 and a decrease in depreciation and amortization of $7,000, there
        was
        a decrease in overhead expenses of $23,000, offset by increases in
        legal$242,000,consulting $65,000, and general and administrative salaries
        $13,000. The Company does not anticipate the same level of consulting and
        legal
        expenses to continue through the remainder of fiscal 2008.
  17
  **Other
        Income (Expense)** **:**
 
 Other
        Income (Expenses) consisted of the following during the three months ended
        August 31, 2008 and August 31, 2007, respectively:
 
 2008
              
              2007Interest
                  income
              
              $
              22,000
              
              $
              5,000Interest
                  expense
              
              
              (679,000
              )
              
              (1,235,000
              )Change
                  in warrant liability
              
              
              (501,000
              )
              
              0Debt
                  settlement
              
              
              0
              
              
              198,000Other
                  income and expense
              
              
              33,000
              
              
              6,000Total:
              
              $
              (1,125,000
              )
              $
              (1,026,000
              )
 
 The
        major
        component of this category is interest expense, accounting for $679,000 of
        a net
        total of $1,125,000 for the three months ended August 31, 2008 compared with
        $1,235,000 of a net total of $1,026,000 for the three months ended August
        31,
        2007. Interest expense decreased by $556,000 in 2008 as compared
        to the same period in 2007, due to amortization in 2007 of a beneficial
        conversion feature related to the Senior Secured Convertible Notes. In fiscal
        2008, the Company recorded the change in the fair value of a warrant liability
        ($501,000). And, during the three months ended August 31, 2007, the Company
        negotiated $198,000 in debt settlement agreements with several vendors. Interest
        income was $17,000 greater during this period in 2008 as the Company maintained
        a greater balance of cash compared to the same period in the previous year.
        Finally, other income and expense increased by $27,000 over the same period
        in
        2007 as a result of increased fees for shared administrative services provided
        to other businesses (former related-party entities).
 
 **Minority
        Interest in Subsidiaries** **:**
 The
        decrease in minority interest in subsidiaries is a result of the increase
        in
        ownership of Myotech, LLC between comparable periods, plus the impact of
        the
        sale of MR Comp by Biophan Europe on June 1, 2008, relative to the allocation
        of
        losses incurred by Biophan Europe..
 
 The
        following comments discuss the significant factors affecting the consolidated
        operating results, financial condition and liquidity and cash flows of the
        Company for the six months ended August 31, 2008 as compared to the six months
        ended August 31, 2007.
  **Comparison
        of the Six Months Ended August 31, 2008 to the Six Months Ended August 31,
        2007**
  **Revenues** **:**
 Revenues
        were $329,000 for the six months ended August 31, 2008 as compared to $332,000
        for the six months ended August 31, 2007. The decrease of $3,000 was due
        principally to a $75,000 decrease in grant revenue associated with the
        Biothermal Power Sources, a $18,000 net decrease in consulting fees provided
        by
        Biophan Europe and its majority owned subsidiary MRComp, offset by a $90,000
        increase in transition service revenue provided to Medtronic, Inc. in connection
        with the $11,000,000 sale of intellectual property rights that occurred in
        October 2007. The Company plans to continue to generate revenue under the
        existing license agreement with Boston Scientific, the transitional services
        arrangement with Medtronic Inc., and will continue to seek other sources
        of
        grant revenues.
  **Research
        and Development Expenses** **:**
 Research
        and development expenses decreased by 44%, or $1,249,000. After factoring
        out
        the decrease in non-cash stock-based compensation expense from 2007 to 2008
        of
        $420,000 and the decrease in depreciation and amortization ($150,000), the
        overall decrease is attributable generally to our planned reductions in spending
        on research and development projects ($386,000), a decrease in salaries
        ($222,000), consulting ($100,000), and overhead ($9,000), offset by an increase
        in patent legal expenses ($38,000). Any further cost reduction measures in
        the
        research and development area will be dependent upon how successful the Company
        is in securing additional funding through research grants.
  **General
        and Administrative Expenses** **:**
 General
        and administrative expenses decreased by 38%, or $1,253,000. After factoring
        out
        the decrease in non-cash stock-based compensation expense from the same periods
        in 2007 and 2008 of $1,267,000 and a decrease in depreciation and amortization
        ($14,000), the decrease is attributable to our planned reductions in spending,
        including decreases in salaries ($115,000), overhead ($117,000), offset by
        increases in consulting ($200,000) and legal expenses ($60,000). The Company
        does not anticipate the same level of consulting and legal expenses to continue
        through the remainder of fiscal 2008.
  18
 
 **Other
        Income (Expense)** **:**
 
 Other
        Income (Expenses) consisted of the following during the six months ended
        August
        31, 2008 and August 31, 2007, respectively:
 
 2008
              
              2007Interest
                  income
              
              $
              55,000
              
              $
              20,000Interest
                  expense
              
              
              (1,441,000
              )
              
              (1,714,000
              )Change
                  in warrant liability
              
              
              (501,000
              )
              
              3,434,000Debt
                  settlement
              
              
              0
              
              
              198,000Liquidating
                  damages
              
              
              0
              
              
              (653,000
              )Other
                  income and expense
              
              
              73,000
              
              
              34,000Total:
              
              $
              (1,814,000
              )
              $
              1,319,000
 
 The
        major
        component of this category is interest expense, accounting for $1,441,000
        of a
        net total of $1,814,000 for the six months ended August 31, 2008 compared
        with
        $1,714,000 of a net total other income equal to $1,319,000 for the six months
        ended August 31, 2007. Interest expense decreased by $273,000 during the
        same
        period in 2008 from 2007, as the Company amortized a beneficial conversion
        feature related to the Senior Secured Convertible Notes in 2007. In fiscal
        2008,
        the Company recorded a change in fair value of a warrant liability ($501,000)
        however this was significantly less than the income recognized in 2007 equal
        to
        $3,434,000, which was related to a similar change in the fair value of a
        warrant
        liability. Also during the six months ended August 31, 2007, the Company
        negotiated $198,000 in debt settlements with several vendors and was required
        to
        pay $653,000 in liquidating damages related to the failure to meet certain
        requirements under the terms of the Senior Secured Convertible Notes. Interest
        income was $35,000 greater during this period in 2008 as the Company maintained
        a greater cash balance as compared to the same period in the previous year.
        And
        finally, other income and expense increased overall by $39,000 as a result
        of
        increased professional service fees rendered to other businesses (former
        related-parties).
 
 **Minority
        Interest in Subsidiaries** **:**
 The
        decrease in this line-item is a result of the increase in ownership of Myotech,
        LLC between comparable periods, plus the impact of the sale of MR Comp by
        Biophan Europe on June 1, 2007,, relative to the allocation of losses incurred
        by Biophan Europe.
  **LIQUIDITY
        AND CAPITAL RESOURCES**
  *Liquidity*
 
 On
        October 3, 2007, we entered into Amendment No. 1 to the Securities Purchase
        Agreement, Senior Secured Convertible Notes, Warrants and Security Agreement
        with ten independent private investors led by Iroquois Master Fund Ltd
        (“Iroquois”). Pursuant to the Amendment and related agreements, certain events
        of default were cured and the investors released certain intellectual property
        for the Security Agreement, allowing the Company to transfer and sell certain
        intellectual property to Medtronic, Inc. Further, in the Amendment, we agreed
        to
        certain spending covenants in connection with the proceeds we received from
        the
        sale of the intellectual property under the Intellectual Property Assignment
        Agreement dated as of August 6, 2007 by and between Biophan and Medtronic.
        On
        October 5, 2007, we closed the transaction contemplated by the Intellectual
        Property Assignment Agreement, sold the foregoing intellectual property to
        Medtronic and received an aggregate of $11,000,000 as the sale price.
  On
        September 24, 2008, Biophan Technologies, Inc. (the “Company”) announced
        execution of a prepayment agreement with the holders of its Senior Secured
        Convertible Notes. Pursuant to the prepayment agreement, the holders of the
        Secured Convertible Notes accepted a prepayment of the remaining $2.3 million
        in
        senior debt, in exchange for an aggregate cash payment of $2.15 million plus
        delivery of 18 million shares of the Company’s common stock. In connection with
        this transaction, note holders were offered additional shares in exchange
        for
        surrendering their warrants to purchase the Company’s common stock, issued in
        connection with the Senior Secured Convertible Notes. Warrants to purchase
        17
        million shares of common stock were redeemed leaving outstanding warrants
        to
        purchase 23 million shares of the Company’s common stock. All of the remaining
        warrants have an exercise price of $0.23 per share.
 
 In
        addition to repaying the Senior Secured Convertible Notes, the Company announced
        entry into an agreement with Biomed Solutions, LLC (“Biomed”) on September 23,
        2008, amending the Company’s subordinated Line of Credit Agreements. The
        amendment extends the terms of the Line of Credit Agreements with Biomed
        until
        December 31, 2012, in exchange for monthly cash payments equal to $15,000.
  19
 
 In
        the
        Fall of 2007, we reorganized our efforts on funding the development of the
        Myotech Cardiac Support System device. On October 2, 2007, we entered into
        a
        revised Securities Purchase Agreement with Myotech, LLC. Pursuant to the
        Agreement, we agreed to purchase from Myotech up to an aggregate of 15,496,547
        membership units for an aggregate purchase price of $3,200,000. We received
        an
        additional 5,000,000 Class A Membership Units and an additional 4,316,547
        Class
        A Membership Units upon the payment of an aggregate initial purchase price
        of
        $1,200,000. Thereafter, Biophan elected to invest an additional $600,000
        for an
        additional 1,854,000 Class A Membership Units of Myotech against the 6,180,000
        available under the amendment to the Securities Purchase Agreement dated
        June
        30, 2008. As of August 31, 2008, 1,854,000 of the 6,180,000 Class A Membership
        Units had been purchased, bringing Biophan’s ownership interest in Myotech to
        70.6%..
  At
        August
        31, 2008, the Company has cash and cash equivalents of approximately $4.8
        million and positive working capital of approximately $2.3 million. We believe
        the Company has adequate working capital resources for the upcoming ten to
        twelve months of operations, however we can make no assurances as to the
        Company's ability to obtain sufficient financing or attain future profitable
        operations.
  ***Capital
        Resources***
  Our
        current strategic plan does not indicate a need for material capital
        expenditures in the conduct of research and development activities.
 
 We
        currently employ nine full-time individuals, all in the U.S.
  **ITEM
        3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
        RISK**
  Not
        applicable.
 
 **ITEM
        4. CONTROLS AND PROCEDURES**
 
 Evaluation
        of Disclosure Controls and Procedures .
 
 Management
        is responsible for establishing and maintaining effective disclosure controls
        and procedures. As of August 31, 2008, our Chief Executive Officer and Chief
        Financial Officer participated with our management in evaluating the
        effectiveness of our disclosure controls and procedures (as defined in
        Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
        amended (the “Exchange Act”)). Our disclosure controls and procedures are
        designed to ensure that information required to be disclosed in the Securities
        and Exchange Commission (“SEC”) reports we file or submit under the Exchange Act
        is recorded, processed, summarized and reported within the time period specified
        by the SEC’s rules and forms and that such information is accumulated and
        communicated to management, including our Chief Executive Officer and Chief
        Financial Officer, to allow timely decisions regarding required disclosure.
        In
        light of the discussion of the material weakness set forth below, these officers
        have concluded that our disclosure controls and procedures were not effective.
        To address the material weakness described below, we performed additional
        analyses and other post-closing procedures to ensure our condensed consolidated
        financial statements were prepared in accordance with accounting principles
        generally accepted in the United States of America (U.S. GAAP). Accordingly,
        management believes that the financial statements included in this Quarterly
        Report on Form 10-Q fairly present, in all material respects, our financial
        condition, result of operations and cash flows for the periods presented.
  Management’s
        Report on Internal Control Over Financial Reporting
 
 A
        company’s internal control over financial reporting is a process designed by, or
        under the supervision of, a public company’s principal executive and principal
        financial officers, or persons performing similar functions, and effected
        by the
        board of directors, management and other personnel, to provide reasonable
        assurance regarding the reliability of financial reporting and the preparation
        of financial statements for external purposes in accordance with generally
        accepted accounting principles (“GAAP”) including those policies and procedures
        that: (i) pertain to the maintenance of records that in reasonable detail
        accurately and fairly reflect the transactions and dispositions of the assets
        of
        the company, (ii) provide reasonable assurance that transactions are
        recorded as necessary to permit preparation of financial statements in
        accordance with GAAP, and that receipts and expenditures are being made only
        in
        accordance with authorizations of management and directors of the company,
        and
        (iii) provide reasonable assurance regarding prevention or timely detection
        of unauthorized acquisition, use or disposition of the company’s assets that
        could have a material effect on the financial statements.
  20
  Management
        is responsible for establishing and maintaining adequate internal control
        over
        financial reporting. Our management, with the participation of our Chief
        Executive Officer and Chief Financial Officer, has assessed the effectiveness
        of
        our internal control over financial reporting as of February 29, 2008 (the
        last
        annual Management’s Assessment of Internal Control over Financial Reporting). In
        making this assessment, our management used the criteria established in *Internal
        Control — Integrated Framework* issued
        by the Committee of Sponsoring Organizations of the Treadway Commission
        (COSO).
 
 A
        material weakness is a control deficiency, or combination of control
        deficiencies, such that there is a reasonable possibility that a material
        misstatement of the annual or interim financial statements will not be prevented
        or detected on a timely basis. In connection with management’s assessment of our
        internal control over financial reporting described above, management has
        identified the following material weakness in the Company’s internal control
        over financial reporting as of February 29, 2008:
 
 The
                  Company did not maintain effective controls over accounting for
                  income
                  taxes, specifically the application of Statement of Financial Accounting
                  Standards No. 109, “Accounting for Income Taxes “ (as Amended), which
                  requires management to 1.) identify and evaluate the tax implications
                  of
                  non-routine transactions, including those related to the acquisition
                  of
                  interest in subsidiaries and the senior secured convertible debt,
                  among
                  others, 2.) evaluate net operating loss carryforwards, 3.) prepare
                  the
                  provision for income taxes and income taxes payable (where applicable)
                  including tax reserves, return to provision adjustments, and 4.)
                  reconcile
                  all differences between tax and financial reporting basis of its
                  assets
                  and liabilities, with its deferred income tax assets and liabilities.
                  Company management does not possess the requisite knowledge or
                  experience
                  to adequately address the financial statement risks associated
                  with
                  certain complex transactions and as a consequence relied on the
                  help of
                  outside advisors (other than their independent auditors) to properly
                  state
                  the Company’s financial statements.
 
 As
        a
        result of the material weaknesses described above, our management concluded
        that
        as of February 29, 2008, we did not maintain effective internal control over
        financial reporting based on the criteria established in *Internal
        Control — Integrated Framework* issued
        by the COSO.
 
 The
        annual report included on Form 10-K referred to above did not include an
        attestation report of the Company’s registered public accounting firm regarding
        internal control over financial reporting. Management’s report was not subject
        to attestation by the Company’s registered public accounting firm pursuant to
        the temporary rules of the SEC that permit the Company to provide only
        management’s report in the aforementioned annual report on the Company’s
        Form 10-K filed with the SEC on June 13, 2008.
 
 Plan
        for Remediation of Material Weaknesses .
 
 In
        response to the identified material weakness, management, with oversight
        from
        the Company’s audit committee, plans to improve internal controls over
        accounting for income taxes by formalizing a periodic tax review process
        that
        includes the development of formalized policies and procedures, required
        periodic consultation with qualified outside advisors, documentation standards
        and workpaper review and approval guidelines. In addition, the Company intends
        to provide tax training and educational opportunities to Company employess
        to
        enhance internal awareness of tax-specific matters.
 
 Notwithstanding
        the material weaknesses discussed above, management believes that the financial
        statements included in this report present fairly, in all material respects,
        our
        financial position, results of operations, and cash flows for the periods
        presented in accordance with U.S. generally accepted accounting
        principles.
 
 Changes
        in Internal Control Over Financial Reporting .
 
 There
        were no changes in our internal controls over financial reporting identified
        in
        connection with the evaluation required by paragraph (d) of
        Rule 13a-15 or Rule 15d-15 under the Exchange Act during the period
        covered by this report that have materially affected, or are reasonably likely
        to materially affect, our internal control over financial
        reporting.
  21
  **PART
        II. OTHER INFORMATION**
  **ITEM
        1. LEGAL PROCEEDINGS**
  We
        are
        not a party to any material legal proceedings and there are no material legal
        proceedings pending with respect to our property, except as noted below.
        We are
        not aware of any legal proceedings contemplated by any governmental authorities
        involving either us or our property. None of our directors, officers or
        affiliates is an adverse party in any legal proceedings involving us or our
        subsidiaries, or has an interest in any proceeding which is adverse to us
        or our
        subsidiaries.
  **ITEM
        1A. RISK FACTORS**
 
 Not
        applicable.
  **ITEM
        2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
        PROCEEDS**
  Not
        applicable.
  **ITEM
        3. DEFAULTS UPON SENIOR SECURITIES**
  Not
        applicable.
  **ITEM
        4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**
 
 At
        a
        special shareholder’s meeting held on September 12, 2008, shareholders were
        asked to approve a proposal to amend the Company’s Articles of Incorporation to
        increase the number of authorized shares of common stock to 800,000,000.
        This
        proposal was adjourned until December 1, 2008 (subject for further adjournment
        by those attending the reconvened meeting) or such earlier date as the Company
        obtains sufficient votes to approve this proposal.
 
 Also
        at
        the special shareholders’ meeting, the 2008 Incentive Stock Plan was approved,
        the shareholders ratified the appointment of Freed, Maxick & Battaglia,
        CPA’s, P.C. to serve as the Company’s independent registered public accounting
        firm for the fiscal year ended February 28, 2009 and the shareholders elected
        the following seven directors to hold office for the ensuing year and until
        the
        election and qualification of their respective successors: Stan Yakatan,
        John
        Lanzafame, Theodore A. Greenberg, Bonita L. Labosky, Guenter Jaensch, Travis
        E.
        Baugh and Harold Gubnitsky.
  **ITEM
        5. OTHER INFORMATION**
  Not
        applicable.
  **ITEM
        6. EXHIBITS**
 **Exhibit**
                  **Number**
                
                **Description
                    of Exhibit**3.1
                
                Articles
                    of Incorporation, incorporated by reference to Exhibit 3.1 to
                    Form 10-KSB
                    for the year ended February 29, 2000, filed with the Securities
                    and
                    Exchange Commission (the “SEC”) on June 13, 2000 (the "2000 10-KSB").3.2
                
                Amendment
                    to Articles of Incorporation, incorporated by reference to Exhibit
                    3.1(i)
                    to Form 8-K filed with the SEC on December 15,
                    2000.3.3
                
                Certificate
                    of Amendment to Articles of Incorporation, incorporated by reference
                    to
                    Exhibit 3.1(i) to Form 8-K filed with the SEC on August 27, 2001.3.4
                
                Certificate
                    of Amendment to Articles of Incorporation, incorporated by reference
                    to
                    Exhibit 3.4 to Registration Statement on Form S-1, filed with
                    the SEC on
                    October 25, 2007.3.5
                
                Bylaws,
                    incorporated by reference to Exhibit 3.4 to Form S-1/A filed
                    with the SEC
                    on May 24, 2007.4.1
                
                Stock
                    Purchase Agreement dated May 27, 2005 between Biophan and SBI
                    Brightline
                    XI, LLC, incorporated by reference to Exhibit 3.2 to Form 10-SB
                    filed with
                    the SEC on May 13, 1999.4.2
                
                Amendment
                    No. 1, dated January 8, 2006, to Stock Purchase Agreement by
                    and between
                    Biophan and SBI Brightline XI, LLC, Incorporated by reference
                    to Exhibit
                    4.21 to Form 10-KSB/A for the year ended February 28, 2005, filed
                    with the
                    SEC on June 22, 2005 (the "2005 10-KSB").4.3
                
                Line
                    of Credit Agreement dated as of May 27, 2005 between Biophan
                    and Biomed
                    Solutions, LLC. incorporated by reference to Exhibit 4.1 to Form
                    8-K filed
                    with the SEC on January 9, 2006.4.4
                
                First
                    Amendment to Line of Credit Agreement between Biophan and Biomed
                    Solutions, LLC, incorporated by reference to Exhibit 10.50 to
                    the 2005
                    10-KSB.4.5
                
                Convertible
                    Promissory Note of Biophan in the face amount of $2,000,000 payable
                    to the
                    order of Biomed Solutions, LLC dated May 27, 2005, incorporated
                    by
                    reference to Exhibit 4.2 to Form 10-Q for the period ended November
                    30,
                    2005, filed with the SEC on January 17, 2006 (the "Q3'05
                    10-Q").4.6
                
                First
                    Amendment to Convertible Promissory Note, incorporated by reference
                    to
                    Exhibit 4.22 to the 2005 10-KSB.4.7
                
                Stock
                    Purchase Warrant issued to Biomed Solutions, LLC dated May 27,
                    2005,
                    incorporated by reference to Exhibit 4.3 to the Q3'05
                    10-Q.4.8
                
                Rights
                    Agreement among Myotech, LLC, the Members of Myotech, LLC and
                    Biophan,
                    incorporated by reference to Exhibit 4.23 to the 2005
                    10-KSB.4.9
                
                Line
                    of Credit Agreement dated as of January 24, 2006 between Biophan
                    and
                    Biomed Solutions, LLC, incorporated by reference to Exhibit 4.1
                    to the
                    Q3'05 10-Q.4.10
                
                Amendment
                    No. 1, dated October 11, 2006, to Line of Credit Agreement by
                    and between
                    Biophan Technologies, Inc. and Biomed Solutions, LLC, incorporated
                    by
                    reference to Exhibit 4.1 to Form 8-K filed with the SEC on January
                    25,
                    2006 (the "January 25, 2006 8-K").4.11
                
                Convertible
                    Promissory Note of Biophan in the face amount of $5,000,000 payable
                    to the
                    order of Biomed Solutions, LLC dated January 24, 2006, ) incorporated
                    by
                    reference to Exhibit 10.2 to Form 8-K filed with the SEC on October
                    13,
                    2006 (the "October 13, 2006 8-K").4.12
                
                Amended
                    and Restated Convertible Promissory Note of Biophan Technologies,
                    Inc., in
                    the principal amount of $5,000,000, dated October 11, 2006, payable
                    to the
                    order of Biomed Solutions, LLC, incorporated by reference to
                    Exhibit 4.2
                    to the January 25, 2006 8-K.4.13
                
                Stock
                    Purchase Warrant for the Purchase of up to 1,198,630 Shares of
                    Common
                    Stock issued to Biomed Solutions, LLC, incorporated by reference
                    to
                    Exhibit 10.3 to the October 13, 2006 8-K.4.14
                
                Subordination
                    and Standstill Agreement dated October 11, 2006, by and among
                    Biophan
                    Technologies, Inc., Biomed Solutions, LLC, and those Purchasers
                    named
                    therein, incorporated by reference to Exhibit 4.3 to the January
                    25, 2006
                    8-K.4.15
                
                Form
                    of Senior Secured Convertible Notes due October 11, 2009 issued
                    pursuant
                    to the Securities Purchase Agreement, dated October 11, 2006,
                    by and among
                    Biophan Technologies, Inc. and those Purchasers named therein,
                    incorporated by reference to Exhibit 10.4 to the October 13,
                    2006
                    8-K.
  22
  4.16
                
                Form
                    of Senior Secured Convertible Notes due October 11, 2009 issued
                    pursuant
                    to the Securities Purchase Agreement, dated October 11, 2006,
                    by and among
                    Biophan Technologies, Inc. and those Purchasers named therein,
                    incorporated by reference to Exhibit 4.2 to the October 13, 2006
                    8-K.4.17
                
                Form
                    of One-Year Warrants issued pursuant to the Securities Purchase
                    Agreement,
                    dated October 11, 2006, by and among Biophan Technologies, Inc.
                    and those
                    Purchasers named therein, incorporated by reference to Exhibit
                    4.3 to the
                    October 13, 2006 8-K.4.18
                
                Form
                    of Three-Year Warrants issued pursuant to the Forbearance Agreement
                    dated
                    as of February 16, 2007 by and among Biophan Technologies, Inc.
                    and the
                    Note Holders named therein, incorporated by reference to Exhibit
                    4.4 to
                    the October 13, 2006 8-K.4.19
                
                Amended
                    and Restated 2001 Stock Option Plan, incorporated by reference
                    to Exhibit
                    4.1 to Form 8-K filed with the SEC on February 27, 2007 (the
                    "February 27,
                    2007 8-K").4.20
                
                2006
                    Incentive Stock Plan, incorporated by reference to Appendix A
                    to Proxy
                    Statement filed with the SEC on Schedule 14A on June 28,
                    2005.4.21
                
                Amendment
                    No. 1 to Securities Purchase Agreement, Senior Secured Convertible
                    Notes,
                    Warrants and Security Agreement, by and among Biophan Technologies,
                    Inc.
                    and those Purchasers named therein, incorporated by reference
                    to Exhibit
                    4.5 and 4.6 to Form 8-K filed with the SEC on October 5,
                    2007.4.22
                
                Consent
                    and Authorization Agreement,****dated October 3, 2007,
                    incorporated by reference to Exhibit 4.5 and 4.6 to Form 8-K
                    filed October
                    5, 2007.4.23
                
                2008
                    Incentive Stock Plan, incorporated by reference to Exhibit 10.1
                    to Form
                    S-8, filed with the SEC on March 24, 2008.4.24
                
                Settlement
                    Agreement with SBI Brightline LLC, SBI Brightline XI LLC and
                    Biomed
                    Solutions LLC, dated November 5, 2007, incorporated by reference
                    to
                    Exhibit 10.1 to Form 8-K, filed with the SEC on November 9,
                    2007.5.1
                
                Opinion
                    of Sichenzia Ross Friedman Ference LLP, incorporated by reference
                    to
                    Exhibit 5.1 to Form S-8, filed with the SEC on March 24,
                    2008.10.1
                
                Agreement
                    dated as of February 24, 2005 among Biophan, aMRIs GmbH, Dr.
                    Michael
                    Friebe, Tomovation GmbH, Prof. Dr. Andreas Melzer, Dipl-Ing.
                    Gregor
                    Schaefers, and Dipl. Betriebsw. Andreas Pieper, incorporated
                    by reference
                    to Appendix A to Proxy Statement filed with the SEC on Schedule
                    14A on
                    June 21, 2006.10.2
                
                Note
                    and Pledge Agreement dated November 24, 2005 between Biophan,
                    Tomovation
                    GmbH and Prof. Dr. Andreas Melzer, incorporated by reference
                    to Exhibit
                    2.4 to the 2005 10-KSB.10.3
                
                Termination
                    of Stock Purchase Agreement between Biophan and SBI Brightline
                    Consulting,
                    LLC, incorporated by reference to Exhibit 4.10 to the 2005
                    10-KSB.10.4
                
                Investment
                    Agreement dated June 30, 2005 between Biophan and Boston Scientific
                    Scimed, Inc., incorporated by reference to Exhibit 4.20 to the
                    2005
                    10-KSB.10.5
                
                Securities
                    Purchase Agreement, dated October 11, 2006, by and among Biophan
                    Technologies, Inc. and those Purchasers named therein, incorporated
                    by
                    reference to Exhibit 4.5 to Form 10-Q for the period ended August
                    31,
                    2005, filed with the SEC on October 17, 2005.10.6
                
                Security
                    Agreement, dated as of October 11, 2006, by and among Biophan
                    Technologies, Inc., the Purchasers named therein and Iroquois
                    Master Fund
                    Ltd., as agent for the Purchasers, incorporated by reference
                    to Exhibit
                    4.1 to Form 8-K, filed with the SEC on October 13,
                    2006.10.7
                
                Forbearance
                    Agreement dated as of February 16, 2007 by and among Biophan
                    Technologies,
                    Inc. and the Note Holders named therein, incorporated by reference
                    to
                    Exhibit 10.1 to Form 8-K filed with the SEC on October 13,
                    2006.10.8
                
                License
                    Agreement between Biophan, Xingwu Wang and Nanoset, LLC dated
                    January 15,
                    2004, incorporated by reference to Exhibit 10.1 to Form 8-K,
                    filed with
                    the SEC on February 27, 2007.10.9
                
                Development
                    Agreement between Biophan and Greatbatch Enterprises, Inc. dated
                    February
                    28, 2001, incorporated by reference to Exhibit 10.50 to Registration
                    Statement on Form SB-2 (File No. 333-109592) filed with the SEC
                    on October
                    9, 2003.
  23
  10.10
                
                License
                    Agreement between Biophan and Johns Hopkins University, incorporated
                    by
                    reference to Exhibit 10.28 to Amendment No. 2 to Registration
                    Statement on
                    Form SB-2/A (File No. 333-102526) filed with the SEC on May 1,
                    2003.
 10.11
                
                AMP-Biophan
                    License Agreement dated February 24, 2005 between Biophan and
                    aMRIs Patent
                    GmbH (Confidential treatment has been granted with respect to
                    certain
                    positions of this Agreement, incorporated by reference to Exhibit
                    10.23 to
                    Amendment No. 1 to Registration Statement filed with the SEC
                    on Form
                    SB-2/A (File No. 333-102526) on March 14, 2003.10.12
                
                License
                    Agreement dated June 30, 2005 between Biophan and Boston Scientific
                    Scimed, Inc., incorporated by reference to Exhibit 10.46 to the
                    amended
                    2005 10-KSB.10.13
                
                Capital
                    Pledge Agreement dated February 24, 2005 among Biophan, TomoVation
                    GmbH,
                    and Prof. Dr. Andreas Melzer, incorporated by reference to Exhibit
                    10.2 to
                    Amended Form 10-Q for the period ended August 31, 2005, filed
                    with the SEC
                    on January 9, 2006.10.14
                
                Securities
                    Purchase Agreement between Biophan and Myotech, LLC, dated November
                    30,
                    2005, incorporated by reference to Exhibit 10.48 to the 2005
                    10-KSB.10.15
                
                Letter
                    Agreement, Amendment and Waiver of Certain Conditions to Closing,
                    between
                    Biophan and Myotech, LLC, dated December 21, 2005, incorporated
                    by
                    reference to Exhibit 10.1 to the Q3'05 10-Q.10.16
                
                Amendment
                    No. 2 to Securities Purchase Agreement dated as of November 28,
                    2006
                    between Myotech LLC and Biophan, incorporated by reference to
                    Exhibit 10.2
                    to the Q3'05 10-Q.10.17
                
                Letter
                    Agreement dated August 19, 2002 between Biomed Solutions, LLC
                    and Biophan,
                    incorporated by reference to Exhibit 10.1 to Form 8-K filed on
                    December 8,
                    2006.10.18
                
                Payment
                    Agreement dated June 3, 2004 between Biophan and TE Bio LLC,
                    incorporated
                    by reference to Exhibit 10.54 to Amendment No. 2 to Registration
                    Statement
                    on Form SB-2 (File No. 333-112678) filed with the SEC on April
                    9,
                    2004.10.19
                
                Joint
                    Research Agreement between Nanolution, LLC and NaturalNano Inc.
                    dated as
                    of May 25, 2005, together with Non-Disclosure Agreement, incorporated
                    by
                    reference to Exhibit 10.16 to Form S-1 filed November 13,
                    2006.10.20
                
                Lease
                    Agreement between Biophan and High Technology of Rochester, Inc.,
                    incorporated by reference to Exhibit 99.1 to Form 8-K filed with
                    the SEC
                    on June 3, 2004.10.21
                
                Lease
                    between Schoen Place LLC and Biophan Technologies, Inc., incorporated
                    by
                    reference to Exhibit 10.19 to Amendment No. 1 to Registration
                    Statement on
                    Form SB-2/A (File No. 333-102526) filed with the SEC on March
                    14,
                    2003.10.22
                
                Amendment
                    No. 1 to Lease between Schoen Place LLC and Biophan Technologies,
                    Inc.,
                    incorporated by reference to Exhibit 10.1 to Form 8-K filed with
                    the SEC
                    on November 9, 2006.10.23
                
                Severance
                    and Covenants Agreement between Biophan and Michael L. Weiner
                    dated
                    October 3, 2007, incorporated by reference to Exhibit 10.1 to
                    the Form 8-K
                    filed with the SEC on October 8, 2007.10.24
                
                Executive
                    Employment Agreement between Biophan and Jeffrey L. Helfer dated
                    June 6,
                    2002, incorporated by reference to Exhibit 10.7 to Form 10-QSB
                    for the
                    period ended May 31, 2002, filed with the SEC on July 15, 2002
                    (the "Q1'02
                    10-QSB").10.25
                
                Executive
                    Employment Agreement between Biophan and Stuart G. MacDonald
                    dated June 6,
                    2002, incorporated by reference to Exhibit 10.9 to the Q1'02
                    10-QSB.10.26
                
                Executive
                    Employment Agreement between Biophan and John F. Lanzafame effective
                    as of
                    September 9, 2004, incorporated by reference to Exhibit 10.49
                    to the 2005
                    10-KSB.10.27
                
                Amendment
                    to Executive Employment Agreement, between Biophan and John F.
                    Lanzafame,
                    dated September 10, 2007, incorporated by reference to Exhibit
                    10.2 to
                    Form 8-K filed with the SEC on September 13, 2007.10.28
                
                Executive
                    Employment Agreement dated as of January 1, 2006 between Biophan
                    and
                    Jeffrey L. Helfer, incorporated by reference to Exhibit 10.2
                    to Form 8-K
                    filed with the SEC on January 26, 2006.10.29
                
                Employment
                    Agreement dated February 24, 2005 among aMRIs GmbH, Dr. Michael
                    Friebe and
                    Biophan, incorporated by reference to Exhibit 10.47 to the 2005
                    10-KSB.
  24
  10.30
                
                Intellectual
                    Property Assignment Agreement, dated August
                    6, 2007, by and between Biophan Technologies, Inc. and with
                    Medtronic, Inc., incorporated by reference to Exhibit 10.1 to
                    Form 8-K
                    filed with the SEC on August 9, 2007.10.30
                
                Amendment
                    to Executive Employment Agreement by and between Biophan Technologies,
                    Inc. and John F. Lanzafame, dated September 10, 2007, incorporated
                    by
                    reference to Exhibit 10.2 to Form 8-K filed with the SEC on September
                    13,
                    2007.
 10.31
                
                Securities
                    Purchase Agreement, dated October 2, 2007, by and between Biophan
                    Technologies, Inc. and Myotech, LLC, incorporated by reference
                    to Exhibit
                    10.1 to Form 8-K filed with the SEC on October 5, 2007.10.32
                
                Severance
                    and Covenants Agreement dated October 3, 2007, incorporated by
                    reference
                    to Exhibit 10.1 to Form 8-K filed with the SEC on October 9,
                    2007.10.33
                
                Amendment
                    No. 2 to Securities Purchase Agreement, Senior Secured Convertible
                    Notes,
                    Warrants, and Security Agreement, dated September 19, 2008, incorporated
                    by reference to Exhibit 10.1 to Form 8-K filed with the SEC on
                    September
                    25, 2008.10.34
                
                Amendment
                    No. 2 to Securities Purchase Agreement, Senior Secured Convertible
                    Notes,
                    Warrants, and Security Agreement, dated September 19, 2008, incorporated
                    by reference to Exhibit 10.2 to Form 8-K filed with the SEC on
                    September
                    25, 2008.10.35
                
                Amendment
                    to Letter of Credit Agreement, dated as of September 23, 2008,
                    incorporated by reference to Exhibit 10.3 to Form 8-K filed with
                    the SEC
                    on September 25, 2008.21.1
                
                Subsidiaries,
                    incorporated by reference to Exhibit 21.1 to Form 10-K for the
                    year ended
                    February 28, 2007 filed with the SEC on May 8, 2007.23.1
                
                Consent
                    of Sichenzia Ross Friedman Ference LLP (See Exhibit
                    5.1)23.2
                
                Consent
                    of Goldstein Golub Kessler LLP, incorporated by reference to
                    Exhibit 23.2
                    to Form 10-K for the fiscal year ended February 29, 2008, filed
                    with the
                    SEC on June 13, 2008.23.3
                
                Consent
                    of Freed, Maxick & Battaglia, CPAs, PC, incorporated by reference to
                    Exhibit 23.3 to Form 10-K for the fiscal year ended February
                    29, 2008,
                    filed with the SEC on June 13, 2008.31.1
                
                Certification
                    of Chief Executive Officer pursuant to Rule 13a-14(a), filed
                    herewith.31.2
                
                Certification
                    of Chief Financial Officer pursuant to Rule 13a-14(a), filed
                    herewith.32.1
                
                Certification
                    of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
                    filed
                    herewith.32.1
                
                Certification
                    of Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
                    filed
                    herewith.
  25
  **SIGNATURES**
  Pursuant
        to the requirements of the Securities Exchange Act of 1934, the registrant
        has
        duly caused this report to be signed on its behalf by the undersigned thereunto
        duly authorized.
  **BIOPHAN
        TECHNOLOGIES, INC.**
 (Registrant)
 
 By:
              /s/
                  John F. LanzafameName:  
                  John F. LanzafameTitle:    
                  Chief Executive Officer(Principal Executive Officer)By:
              /s/
                  Margaret V. RussellName:  
                  Margaret V, RussellTitle:    
                  Chief Financial Officer(Principal Financial Officer andPrincipal
                  Accounting Officer)Date:
                  October 14, 2008
  26